Source: https://ulcc.ca/en/annual-meetings/235-2008-quebec-city-qc/civil-section-documents/456-interest-act-report-2008?tmpl=component&print=1&page=
Timestamp: 2019-04-20 18:10:26+00:00

Document:
In September 2007, in Charlottetown, P.E.I., Professor Thomas G.W. Telfer of the University of Western Ontario presented a paper on the Interest Act, R.S.C. 1985, c.I-15, entitled “Preliminary Background Paper on the Canada Interest Act” to the Uniform Law Conference of Canada.
 Professor Telfer’s paper examined the history of the Interest Act and the subject-matters covered by its provisions. He reviewed the Act’s original purposes and questioned whether, in light of those original purposes, the Interest Act had continuing relevance in today’s commercial reality.
 After receiving Professor Telfer’s paper and oral presentation, the Commercial Section of the ULCC resolved to form a working group to further consider the issues raised by his report and to examine the provisions of the Interest Act in light of provincial legislation and common law developments.
 Most ULCC projects raise questions and concerns as to the uniformity of provincial and territorial legislation. This project does not; instead, it raises questions as to the extent to which the provisions of the federal Interest Act are duplicated in existing provincial and territorial legislation and the extent to which the Interest Act provisions, whether they are duplicated in provincial and territorial legislation or not, remain relevant.
 The working group on this project consisted of Professor Tom Telfer, Professor Mary Anne Waldron of the University of Victoria, David Young of Lang Michener LLP (Toronto) and Lisa Peters of Lawson Lundell LLP (Vancouver), who is a member of the B.C. delegation to the ULCC. Michelle Bissenden of Lawson Lundell LLP provided research assistance.
 The working group assembled a collection of provisions in provincial and territorial statutes and regulations dealing with interest rates, disclosure of the cost of borrowing and unconscionable transactions. It then considered the relationship between those provisions and the existing provisions of the Interest Act in the context of the jurisprudence on those provisions and considered to what extent the Interest Act provisions are duplicated or made redundant by the provincial and territorial legislation.
 Where the Interest Act provision in question had no equivalent in provincial and territorial legislation, the working group considered whether the provision continued to serve a valid regulatory purpose in light of the jurisprudence considering it and modern lending and contract law and practice.
 The working group also reviewed provisions in other federal statutes dealing with interest rates.
 The working group was not formed until early 2008. Because of the short time frame available for carrying out our deliberations, this report and the recommendations contained in it are preliminary only. The working group would like to continue its work into 2009 and, in particular, to have the ability to consult with lawyers practicing in the areas of real estate, consumer and banking law and with consumer and lender associations.
 The subject-matter of “Interest” was granted exclusively to the federal Parliament under subsection 91(19) of the Constitution Act, 1867. As will be apparent from this report, the provinces and territories have enacted legislation dealing directly with interest rates and also have dealt with that subject-matter more indirectly by enacting consumer legislation. From a constitutional perspective, such legislation has survived constitutional challenges where the legislation can be justified under a head of jurisdiction that courts do not classify as primarily concerned with financial matters and therefore not a major erosion of the federal authority. The fact is, however, that little of the existing provincial and territorial legislation has ever been the subject of a constitutional challenge. Because the body of constitutional law in this area is small, and much of it dates from other decades or centuries, the boundaries of the federal power and the extent to which provinces and territories can encroach upon it are not clear.
Except as otherwise provided by this Act or any other Act of Parliament, any person may stipulate for, allow and exact, on any contract or agreement whatever, any rate of interest or discount that is agreed on.
 As Professor Telfer pointed out in his 2007 paper, Parliament enacted the original version of this provision in 1886 with a view to abrogating usury laws then in force in some of the provinces.
 Lenders (and others providing for contractual interest) are still subject to the other provisions of the Act, to section 347 of the Criminal Code, and to any other federal statute prescribing interest rates. A chart attached to this paper as Schedule “A” identifies provisions in other federal statutes prescribing interest rates.
 There are four types of provisions dealing with interest rates in other federal legislation: those fixing an interest rate or providing a formula for fixing an interest rate; those setting out a default rate for circumstances where the interest rate cannot be ascertained; those setting out a maximum interest rate; and those setting out a range for the interest rate (the interest cannot be less than the minimum rate stated or more than the maximum rate stated).
(j) stipulating the interest rate applicable where, in the context of credit sales of goods to an importer in Canada, it is not possible to ascertain the interest rate referred to in a clause of the Special Import Measures Act, or there is no such interest rate.
 While “interest” is a federal subject-matter under the Constitution Act, 1867, there are in fact numerous provincial and territorial statutes prescribing interest rates in the context of subject-matters within provincial or territorial competence. Schedule “B” identifies provisions in provincial and territorial statutes prescribing interest rates. Schedule “B” will be discussed below in the context of section 3 of the Act. It should be noted that provincial consumer legislation, which typically avoids specifically prescribing fixed, minimum, maximum or default interest rates but instead regulates disclosure of the cost of borrowing and provides relief in cases of unconscionable transactions, could be viewed as the modern substitute for usury legislation.
 Section 2 is not an impediment to commerce, nor has it given rise to difficulties in interpretation or application like some of the other provisions of the Interest Act. Section 2 and the principle of freedom of contract it embraces may influence the interpretation of parties’ agreements by the courts. While its scope may have been whittled down by the choice of both the federal Parliament and provincial and territorial Legislatures to regulate interest rates in specific contexts, and by consumer protection legislation, the working group is not prepared to say that section 2 no longer serves a purpose. It continues to articulate the federal laissez-faire policy first articulated in 1886 – that absent legislation to the contrary, parties are free to stipulate for any agreed-upon rate of interest. Because the policy reflected in section 2 is still current, the provision is not obsolete.
 Professor Telfer’s 2007 paper reveals that the rate of five percent was set in 1900, apparently to reflect the lending rates at financial institutions at that time.
(b) The phrase “fixed …by law” has been construed to cover circumstances where an interest rate is fixed by statute, where a formula for setting the rate is set out in a statute, or where the statute delegates discretion to a judge, adjudicator or adjudicative agency to set the rate.
 As with the federal provisions dealing with interest rates, there are four categories of interest rate provisions in provincial and territorial statutes and regulations: those setting a fixed rate or formula; those setting a default rate; those setting a maximum rate and those setting a minimum rate. Schedule “B” summarizes the provincial and territorial provisions under those category headings.
(m) Provisions setting the interest rate payable under contracts for sale of Crown lands.
 In light of the range of provincial and territorial provisions dealing with interest rates and in light of the narrow scope left in which section 3 of the Interest Act operates both because of the provincial and territorial incursions and because of the construction given to section 3 by the courts, is this default rate required?
(c) The provinces and territories have not completely occupied the field (and constitutionally-speaking could not do so) and the interest rate provisions in provincial and territorial legislation are also subject-matter and context specific.
 The second question raised in relation to section 3 is whether, in a world of fluctuating interest rates, a fixed rate of 5% per annum makes sense, especially given its provenance.
 While some of the interest rate provisions set out in Schedules “A” and “B” contain a fixed rate (i.e., 3% per annum), many contain instead a statutory formula that permits the prescribed interest rate to move with the market.
the aggregate of one per cent and the rate fixed by the Minister for each loan year by calculating, immediately preceding the commencement of that loan year, the simple arithmetic mean of the mid-market yields at the close of business on Wednesday in respect of the six months immediately preceding the commencement of that loan year on all Government of Canada bonds payable in Canadian currency and due to mature in one to five years, as computed and provided by the Bank of Canada, rounded to the nearest one-eighth of one per cent.
 Other provisions are much simpler. The Interest and Administrative Charges Regulations provide, in subsection 5(1), for interest on amounts owing to Her Majesty to be “calculated and compounded monthly at the average bank rate plus 3%”.
the mean, rounded to the nearest whole percentage point, of the annual rates of interest announced by each of the Royal Bank of Canada, The Bank of Nova Scotia, the Canadian Imperial Bank of Commerce, the Bank of Montreal and The Toronto-Dominion Bank to be its prime or reference rate of interest in effect on that date for determining interest rates on Canadian dollar commercial loans by that bank in Canada.
 In the view of working group, it would be preferable for the default rate in section 3 of the Interest Act to be tied to market rates in some fashion.
4. Except as to mortgages on real property of hypothecs on immovables, whenever any interest is, by the terms of any written or printed contract, whenever under seal or not, made payable at a rate or percentage per day, week, month or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent.
 The main deficiency of the provision is that it provides no specification as to how the interest amount should be calculated (i.e., the frequency of calculation and payment, whether in advance and whether to be compounded).
 A second deficiency is that the section provides no guidance as to whether the disclosure required is simply of the nominal rate of interest (i.e., the actual stated rate) or an effective rate (i.e., an annual rate that reflects the actual anticipated interest to be paid on the principal from time to time over the period of a year, including periodic payments of interest and principal and compounding of interest). Consider the following example – a student pays $10,000 in tuition on January 1 using a credit card with an advertised nominal interest rate of 20% per annum. If the credit card company in fact charges interest at the nominal rate, then the student will pay $2,000 per annum in interest (assuming no payments are made during that period). However, if interest is compounded monthly, then the student will pay $2,190 since the effective rate will be 21.9% despite an advertised nominal rate of 20%. For those on a tight budget, this difference could be significant. Based on the case law, it appears that the courts interpret the disclosure requirement in section 4 to be solely that of the nominal rate.
 Another issue that the courts have addressed is whether the legislation only applies to consumer transactions or to all transactions. The Supreme Court of Canada has stated that the legislation is “consumer protection law,” suggesting that it does not apply to sophisticated borrowers. However, this statement did not go so far as to clearly say the legislation only applies to consumer transactions and recent decisions have reached opposite conclusions. On its face, the provision is not restricted to consumer transactions.
 It may be noted also that the provision is not restricted to lending transactions, but applies to any contract in which interest is stipulated. Therefore, courts have applied the provision to interest on overdue utility bills.
 Notwithstanding the noted deficiencies, section 4 does represent a generally-applicable obligation for lenders and others to state an annual rate of interest in their contract documents. In the context of determining whether the provision should be amended or eliminated, the question may be posed whether there are other laws that perform this function equally well or better.
 We note that there are a variety of public sector laws that require disclosure of a rate of interest and in certain instances (such as under the Income Tax Act), specification of that rate. In many cases there is no requirement to stipulate a precise form of interest disclosure (e.g., annual rate) or on what basis it will be charged. However, it is reasonable to assume that, if not so specified, in most if not all cases the rate is intended to mean an annual rate.
 Legislation stipulating interest rate disclosure for private sector transactions is almost exclusively limited to the cost of credit disclosure requirements under provincial consumer protection laws and certain federal statutes such as the Bank Act, the Cooperative Credit Associations Act and the Insurance Companies Act. The provincial consumer protection rules generally apply to “consumers” (i.e., individuals who are not carrying on business); the federal rules, which are very similar, apply to loans made to “natural persons” for other than business purposes.
 The thrust of the cost of credit disclosure legislation is to provide disclosure to borrowers, including credit card users, of the full cost of borrowing. The primary means of accomplishing this objective is the determination and disclosure of an “annual percentage rate” or (“APR”) which factors in not only periodic interest calculations and principal payments, but also interest-free periods, certain fixed non-interest costs (including for example bonuses and any lump sum payments), and the cost of any other requirements that a borrower must meet (such as motor vehicle searches). In some instances, but not always, the APR is equal to the interest rate disclosed by a loan. Therefore, while the APR constitutes a sophisticated and comprehensive disclosure of an effective interest rate, it may differ significantly from the nominal annual rate of interest.
 However, the cost of credit disclosure legislation also stipulates that disclosure of the nominal rate of interest be made to borrowers. In most instances this requirement is described as the “annual interest rate”. In certain instances the required disclosure is stated as the “interest rate”. In all instances, however, we believe that the requirement should be read as referring to an annual rate and where this is not clearly stated, clarification by amending regulation could be accomplished.
 In addition to general cost of credit disclosure legislation, certain provinces have enacted “Payday Loans” laws that apply in addition to the general cost of credit disclosure rules. Some but not all of these laws require disclosure of a rate of interest, but in no case is this expressly stipulated to be an annual rate. Ontario’s payday loan rules, which are found in the Consumer Protection Act, do not require disclosure of a rate of interest but do require disclosure of the APR, which as noted above, may be the same as the interest rate.
 It should be noted that the consumer protection/cost of credit/payday loans rules only apply to loan transactions. Other contracts stipulating for interest, such as overdue payment of utility bills, or contracts imposing a “service charge” stated as a percentage rate, would not be subject to these rules. Section 4 of the Interest Act has been held to apply to such contracts.
 The most significant difference in application between section 4 and cost of credit/payday loans legislation, however, is that the latter only applies to consumers (or in the case of the federal rules, natural persons not borrowing for business purposes) whereas the former is not clearly so restricted. The question is posed therefore, whether section 4 has potentially beneficial application to non-consumer transactions. It may be recalled that at the time of enacting the new cost of credit rules, certain provinces considered, but ultimately decided against, extending their application to small businesses. An argument can be made that many of such businesses are not very sophisticated in their financial dealings and would benefit from a protective disclosure regime as may be provided by section 4.
 Consideration should be given to whether the nature of the information provided by section 4 disclosure is useful to borrowers. It appears that all that is required is disclosure of the nominal annual rate of interest which, in differing circumstances, may be higher or lower than the effective rate. However, we note that disclosure of the nominal annual rate of interest in any transaction is a useful item of information to the borrower, whether or not other legislation requires a more sophisticated form of disclosure. The requirement for this disclosure, which may be duplicated in certain other statutes also applicable to a transaction, does not conflict with other material disclosure requirements, nor does it hamper or restrict transactions to which it applies.
 We also note that section 4 provides a residual rule for financing and other transactions which stipulate a cost of using money by way of an interest rate. It is residual in that it will apply to transactions not covered by the consumer protection legislation including loans to small businesses where the borrowers may be unsophisticated and to transactions involving an element of financing that do not fall within that legislation, such as overdue utility bills.
 While the nature of the disclosure (nominal interest rate) may not in all cases reflect the effective rate, it does require disclosure of a rate that in many instances will be a close approximation of the effective rate and therefore may be viewed as a beneficial “user-friendly” protective requirement. However, consideration also should be given to whether an amendment requiring disclosure of an effective rate of interest, instead of the nominal rate, should be made. The difficulty here would be to define what is meant by the effective rate, which will vary depending on the circumstances. Any such definition would need to be general in terms but encompass sufficient specificity to ensure applications to all materially relevant circumstances.
 In summary, in that section 4 does not clash with provincial and territorial legislation and covers transactions not captured by that legislation, it is not obsolete. The provision might have more utility if it required disclosure of an effective rate of interest rather than the nominal rate. This topic would form part of any consultation carried out by the working group going forward.
6. Whenever any principal money or interest secured by mortgage on real property or hypothec on immovables is, by the mortgage of hypothec, made payable on a sinking fund plan, on any plan under which the payments of principal money and interest are blended or on any plan that involves an allowance of interest on stipulated repayments, no interest whatever shall be chargeable, payable or recoverable on any part of the principal money advanced, unless the mortgage or hypothec contains a statement showing the amount of the principal money and the rate of interest chargeable on that money, calculated yearly or half-yearly, not in advance.
7. Whenever the rate of interest shown in the statement mentioned in section 6 is less than the rate of interest that would be chargeable by virtue of any other provisions, calculation or stipulation in the mortgage or hypothec, no greater rate of interest shall be chargeable, payable or recoverable, on the principal money advanced, than the rate shown in the statement.
 What section 6 requires is clear, although it may be of limited value. The section requires that however the lender chooses to compute its interest on a mortgage loan, it must provide the borrower with the equivalent interest rate based upon yearly or half-yearly compounding. This, one might think, could provide at least a standard mode of expression of the interest rate which could enable a borrower to conveniently comparison shop. However, two principal factors militate against the usefulness of the disclosure.
 First, the interest as expressed in a section 6 disclosure does not have to take into account any form of cost other than that which accrues from day to day. Thus, the effect of a bonus or of various administrative and service charges is completely left outside the purview of the section. This lessens the utility of the disclosure for comparison purposes. A loan with a lower stated interest rate may in fact be more expensive due to other changes. That is not something section 6 will assist the borrower to decide.
 Second, section 6 requires only that the disclosure be made in the mortgage itself. What the borrower has been told or discovered during the period in which he or she is deciding which loan to take or whether to borrow is not constrained by the section. The first time a mortgage borrower sees the mortgage document itself is usually in the lawyer’s office when it is presented for signature. The mortgagor is, by that time, usually committed to the transaction and may be less than interested in technical details, having made the decision some time earlier. The section 6 disclosure, therefore, has no effect on the ability of the borrower to compare various mortgage products.
 Apart from the possibility that it might provide a standard form of disclosure of the narrowly-construed interest rate for a loan, section 6 requires disclosure of very few of the things modern borrowers might want to know about their loan. For one thing, the concept of an equivalent rate is not one that most consumers would understand without considerable explanation. The usefulness of disclosing an equivalent rate may therefore be questionable. On other important topics, the disclosure required says nothing about prepayment options; tells the borrower nothing about renewal costs or any other costs or charges; does not require the allocation of payments in any particular way; and does not require disclosure of the term of the loan or the amortization period (if the loan is amortized). This list of omissions is only a partial one. And, if the loan is for a variable rate of interest, section 6 provides none of the safeguards that are needed to properly inform the borrower of what he or she is paying at any given time. Indeed, to comply with section 6, a table of possible equivalent rates may be included, but the section would not, of itself, require the borrower to be informed when the rate changes.
 These objections to section 6 alone would be significant. However, an even greater challenge to the usefulness of the section arises from the description of the three forms of mortgage loan to which it applies. No case seems ever to have decided that section 6 applied to a mortgage because it was “payable on a sinking fund plan” or because it involved “an allowance of interest on stipulated repayments.” Exactly when the section’s application would be triggered by these descriptions is therefore in doubt. That it has not occurred in over one hundred years would seem to suggest that it serves no useful purpose.
 Many laypeople would likely consider that their mortgages were representative of a the third type of plan involving “blended payments”. Common sense would suggest that this would describe a payment in which principal and interest were mixed together as is the case in the great majority of residential mortgages where a monthly payment contains some component of both principal and interest. However, case law progressively narrowed the meaning of a “blended payment” until it has come to mean only payment plans that conceal the interest charged. Exactly what this means is still unclear. It does not include any case in which payment dates and compounding dates coincide since the mathematics required to compute the amount of principal and interest is simple.
 Whether it applies to a case in which payment is monthly and compounding is at longer intervals and in which dividing the payment between its principal and interest components requires the use of interest factors is still not entirely settled. However, the decision of the Supreme Court of Canada in Ferland v. Sun Life Assurance strongly suggests that even then, unless there is an actual mathematical impossibility of separating the payments, the payment is not blended. The test of whether it was mathematically possible to separate the components of the payments was also applied in the more recent decision of Blerot v. Attorney-General of Canada. In face of such uncertainty, the advice of the Saskatchewan Court of Appeal to save litigation costs and include an equivalent half-yearly rate is almost universally accepted in Canada. In British Columbia, for example, the statutory form of mortgage includes a section for disclosing the equivalent rate compounded half-yearly.
 The lack of certainty in this narrow category has, as noted, led to compliance with section 6 (whether required or not) in all typical amortized mortgage loans. That certainly appears to be the only category of mortgage in which any scope for section 6 remains. Since most residential mortgages would fit this mold, one can conclude that section 6 is normally complied with in the consumer context. Whether it is needed in this context is another matter.
 The federal Bank Act and a number of provincial consumer protection statutes require that a borrower on a mortgage loan for personal or household purposes receive an extensive disclosure statement related to the loan, its terms and its cost, at least two days before the obligation is entered into. The disclosure statement provides much more useful and extensive information to the borrower about his or her loan than does the limited disclosure required by section 6. Most costs of borrowing have to be included in the cost of the loan. The method of disclosure of the interest rate is also highly regulated and the problem of what occurs if the interest rate is to vary over the term of the loan is extensively dealt with. The disclosure required, in short, is more useful and considerably timelier than the disclosure for section 6. For many consumer mortgagors across the country, section 6 is largely redundant.
 The remaining category of mortgages to which section 6 might arguably apply and which are not covered under either the Bank Act or consumer protection statutes is the business loan where the loan is amortized and payment and compounding dates do not coincide. Many commercial loans, of course, would not be of this type since amortized loans with monthly payments are less common in this market. Thus, the protection afforded by section 6 is “hit and miss” for loans to businesses. It may be argued, as legislators seem to accept in consumer protection legislation, that businesspeople do not require the protection of statutorily mandated disclosure. However, people operating small businesses and borrowing, perhaps, against their residential property for business purposes, may often not be much more sophisticated than the average consumer borrower. Is there a case for retaining section 6 to protect such borrowers?
 While there is arguably a case that the small business owner needs protection, section 6 as it stands does little to assist him or her for reasons already noted. It applies only to a very narrow range of mortgage loans (if it applies there); does not provide adequate disclosure to properly inform the borrower about the loan; and is not timed in a way that would allow the borrower to take any advantage from what he or she is told. Section 6 is a poor substitute for more adequate protection which would be similar to what is given consumers.
 The severity of the penalty for failing to make a needed disclosure – the loss of all interest on the loan – may explain the unwillingness of the courts to use section 6 in any robust way. A more moderate approach to enforcement might have allowed some development of section 6, causing it to evolve into a more effective tool. But the debate on useful credit disclosure has become much more sophisticated in the last twenty-five years. Section 6 cannot compete with modern generation disclosure statutes. Given its restrictive, almost accidental application and the shortcomings of what it provides, the preliminary view of the working group would be to recommend outright repeal.
 However, since the disclosure of the semi-annual rate has become the standard mode of expression of the interest rate in most amortized mortgages, we recommend consultation with lenders and real estate lawyers as to whether the repeal of sections 6 and 7 would negatively affect established practice. If there is a reluctance to repeal a section that has become so enshrined in Canadian mortgage lending practice, an alternative would be to amend section 6 so that its application to the typical amortized mortgage is clear. In the next phase of this project, the working group will also consult possible amendments to section 6 as an alternative to repeal.
 The question might also be asked whether section 6 should rather be turned into effective disclosure legislation, mirroring that adopted in many provinces. We do not recommend this course of action. We consider that there would be little point in increasing the complexity of the varying disclosure schemes that now exist by adding another federal level to them. Rather, provinces might be asked to reconsider whether the small business borrower is not in need of protection comparable to the consumer and to make further efforts at establishing uniformity among themselves in their credit disclosure legislation and its coverage of mortgage loans.
10. (1) Whenever any principal money or interest secured by mortgage on real property or hypothec on immovables is not, under the terms of the mortgage or hypothec, payable until a time more than five years after the date of the mortgage or hypothec, then, if at any time after the expiration of the five years, any person liable to pay, or entitled to pay in order to redeem the mortgage, or to extinguish the hypothec, tenders or pays, to the person entitled to receive the money, the amount due for principal money and interest to the time of payment, as calculated under sections 6 to 9, together with three months further interest in lieu of notice, no further interest shall be chargeable, payable or recoverable at any time after the payment on the principal money or interest due under the mortgage or hypothec.
 Section 10 is an illustration of the wide discrepancy between Parliament’s original purpose in 1880 in relation to mortgage repayment rights and modern mortgage lending practices of today. Section 10 provides for a mortgage repayment right after 5 years and the provision was enacted in 1880 to deal with long term mortgages. In the late nineteenth century the term of the mortgage frequently matched an equally long amortization period. Without statutory protection, borrowers had to pay an enormous penalty to repay the mortgage in advance. Since there was no right under common law or equity relating to the right to prepay a borrower might be unable to pre-pay at all. If a lender did stipulate for a repayment right it could insist on any amount of liquidated damages up to all the interest that would have been earned over the balance of the term. Section 10 enabled the borrower to repay after 5 years by paying 3 months interest in advance.
 Modern lending practices have shifted to short term mortgages of 6 months to 5 years with long amortization periods. Could section 10 be of any relevance to a short term mortgage? What if the borrower renewed or extended the original mortgage? When might the five year repayment right begin? A plain reading of section 10 does not provide an answer to questions arising from modern lending practices.
 The Court established that where the borrower had entered into a mortgage which was longer than five years (the situation to which the section originally applied), the borrower could pay off the mortgage at the end of five years. Where the mortgage was for a term of five years or less and there is an extension of the mortgage (without altering the date of the original mortgage), the five year repayment period will begin from the date of the original mortgage.
 Where the borrower has not exercised section 10 rights and entered into a renewal (the terms of which deem the date of the mortgage to be the date of maturity), the borrower cannot pay off the mortgage until five years of the renewal period have elapsed. In other words, re-dating of the mortgage starts the five year period again. For example, an initial five year period which is renewed for a further five years (with the mortgage redated) will not permit the borrower to pay off the mortgage until the end of the five year renewal period. It is the working group’s understanding that Potash sets the standard in residential real estate mortgage practice.
 Given that the wording of section 10, as interpreted by the Supreme Court of Canada in the Potash decision, still has relevance today, the working group will be consulting with the legal profession as well as financial institutions on possible reform recommendations. The Working Group has no tentative or firm recommendations at this time and we will undertake a consultation before making specific recommendations on section 10.
 We also note that section 10 overlaps with provisions found in at least two other provincial statutes. The Ontario Mortgages Act and the Manitoba Mortgage Act both offer a similar repayment right to what is found in section 10 of the Interest Act. Our consultation would seek input on how this overlap might be best resolved.
 See Mary Anne Waldron, The Law of Interest in Canada (Scarborough, Ont.: Carswell, 1992) at 24. The leading Supreme Court of Canada case on point is still Ontario (Attorney General) v. Barfried Enterprises Ltd.,  S.C.R. 570.
 R.S.C. 1985, c. C-46. The impact of this provision on commercial transactions was dealt with in a paper by Jennifer Babe entitled “Section 347 of the Criminal Code of Canada: Business Law Problems Remain” presented at the 2007 ULCC Conference. That topic will not be covered in this paper.
 In the Special Measures Import Regulations, S.O.R./84-927.
 See, for example, Bank of Nova Scotia v. Dunphy Leasing Enterprises Ltd. (1991), 83 Alta. L.R. (2d) 289 at para. 105 (C.A.); aff’d (1994), 18 Alta. L.R. (3d) 2 (S.C.C.).
If interest on any debt or sum certain is provable under this Act but the rate of interest has not been agreed on, the creditor may prove interest at a rate not exceeding five per cent per annum to the date of the bankruptcy from the time the debt or sum was payable, if evidenced by a written document, or, if not so evidenced, from the time notice has been given the debtor of the interest claimed.
 British Pacific Properties Ltd. v. British Columbia (Minister of Highways & Public Works),  2 S.C.R. 283 at 290.
 See, for example, IAC Ltd. v. Guerrieri (1982), 139 D.L.R. (3d) 352 (Ont. C.A.); Toronto-Dominion Bank v. F.G. Connolly Ltd. (1982), 56 N.S.R. (2d) 289 (S.C. – T. Div.); McLeod Young Weir Ltd. v. Nunziata,  O.J. No. 701 (C.J. – Gen. Div.); Huber v. Commcorp Financial Services Inc.,  7 W.W.R. 506 (Sask. Q.B.).
 British Pacific Properties Ltd., supra note 11 at 289-90.
 Pizzey Estate v. Crestwood Lake Ltd. (2004), 69 O.R. (3d) 306 at para. 37 (C.A.).
 Alta. Reg. 348/1993, s. 16.
 See, e.g., R.R.O. 1990, Reg. 944, s. 2.
 R.S.C. 1985, c. I-15, s.4.
 Canadian Tire Acceptance Ltd. Card Holders v. Canadian Tire Acceptance (1994), 118 D.L.R. (4th) 238 (Ont. Ct. (Gen. Div.)) aff’d (1995), 26 O.R. (3d) 95 (C.A.); Prince Albert Co-operative Assn. v. Rybcka (2006), 289 Sask. R. 92 (C.A.).
 V.K. Mason Construction v. Bank of Nova Scotia,  1 S.C.R. 271.
 R.S.C. 1985, c. 1 (5th Supp.), s. 162.1.
 See, e.g., Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A, ss. 77-81; Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2, ss. 57-70.
 S.C. 1991, c. 46, ss. 450-453, 568-571.
 S.C. 1991, c. 48, ss. 385.16-385.2.
 S.C. 1991, c. 47, ss. 480-484.
 See Bank Act, supra note 24 at s. 1.
 See Consumer Protection Act, supra note 23 at s. 1; see also Business Practices and Consumer Protection Act, supra note 23 at s. 1.
 O. Reg. 17/05, s. 62.1.
 Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler and Mills (1991), 79 D.L.R. (4th) 154 (Ont. C.A.).
 And any amount overpaid may be recovered back or deducted from any other interest. See section 9, Interest Act.
 London Loan and Savings Co. of Canada v. Meagher,  S.C.R. 378.
 Metropolitan Trust v. Twin Grand Development Ltd.,  1 W.W.R. 533 (Sask. Q.B.); aff’d  10 W.W.R. 576 (Sask C.A.).
 The phrase has been considered, but never applied. See Commonwealth Savings Plan Ltd. v. Triangle “C” Cattle Co. Ltd. and Pozzobon (1966), 55 W.W.R. 52 (B.C.C.A.).
 Re Kilgoran Hotels Ltd. and Samek,  S.C.R. 3.
 (2001), 203 Sask. R. 73 (C.A.).
 Saskatchewan Co-Operative Financial Services Ltd. v. Tarel Hotel (1994), 118 D.L.R. (4th) 629 (Sask. C.A.); leave to appeal to S.C.C. refused,  2 S.C.R. ix.
 Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2; Fair Trading Act, R.S.A. 2000, c. F-2; Cost of Credit Disclosure Act, 2002, S.S. 2002, c. C-41.01; Consumer Protection Act, C.C.S.M. c. C200; Cost of Credit Disclosure Act, S.N.B. 2002, c. C-28.3; Consumer Protection Act, R.S.P.E.I.1988, c. C-19.
 Ontario has chosen not to include mortgages in its cost of borrowing disclosure legislation. That policy choice, of course, affects a significant number of consumers, although those borrowing from federal banks would have the protection of the Bank Act.
 Only one case appears to have applied s. 6 to deprive the lender of interest. See Bank of Nova Scotia v. Daniel (1986), 38 R.P.R. 316 (Alta. Q.B.).
 Proposed amendments to section 6 have been passed, but never brought into force. The 2001 amendment (c. 4, s. 176) appeared to expand the classes of mortgage covered by the section to include those set out in regulation and to allow regulations to require the kind of disclosure to be made. This does not seem an advisable choice since it left the current archaic language and the timing of the disclosure unchanged.
 Senate Debates (28 April 1880) at 404; House of Commons Debates (31 March 1880) at 963; Mary Anne Waldron, "The Federal Interest Act: it sure is broken, but is it worth fixin’" (1997), 29 Can. Bus. L.J. 161 at 164.
 Reliant Capital Ltd. v. Silverdale Development Corp., 2006 BCCA 226; 270 D.L.R. (4th) 717 (B.C.C.A.) at paras. 68-69; leave to appeal to S.C.C. refused,  2 S.C.R. viii.
 See T. Telfer, “Preliminary Background Paper on the Canada Interest Act” (Uniform Law Conference of Canada, 2007) at para 35.
 See e.g., Reliant Capital Ltd. v. Silverdale Development Corp., supra note 48 at para. 56.
 Mary Anne Waldron, Q.C., “The ‘Legitimate Purposes’ Test: Are Roses Changing Their Names?” U.B.C. L. Rev. (forthcoming).
Reliant Capital Ltd. v. Silverdale Development Corp., supra note 48 at para. 55.
 Waldron, supra, note 46. See e.g., Unconscionable Transactions Act, R.S.A. 2000, c. U-2; Unconscionable Transactions Relief Act, R.S.S. 1978, c. U-1; Unconscionable Transactions Relief Act, C.C.S.M. c. U20; Unconscionable Transactions Relief Act, R.S.O. 1990, c. U.2; Unconscionable Transactions Relief Act, R.S.N.L. 1990, c. U-1; Unconscionable Transactions Relief Act, R.S.N.B. 1973, c. U-1; Unconscionable Transactions Relief Act, R.S.N.S. 1989, c. 481; Unconscionable Transactions Relief Act, R.S.P.E.I. 1988, c. U-2.
 Waldron, supra, note 1; Telfer, supra, note 49 at para 42; House of Commons Debates (31 March 1880) at 964.
 Mary Ann Waldron, “Section 10 of the Interest Act: All the King’s Men” (1988), 13 C.B.L.J. 468 at p. 473-474; Waldron, supra, note 1 at 91-92; Potash v. Royal Trust Co.,  2 S.C.R. 351 at para.13.
 Waldron, supra, note 1 at 92-93. See e.g., 233467 B.C. Ltd. v. Montreal Trust of Canada (1994), 115 D.L.R. (4th) 124 (B.C.C.A.); Litowitz v. Standard Life Assurance Co. (Trustee of) (1996), 30 O.R. (3d) 579 (C.A.) ; leave to appeal to S.C.C. refused,  2 S.C.R. ix.
 R.S.O. 1990, c. M.40, s. 18(1).
 C.C.S.M. c. M200, s. 20(6).

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