Bill 200: 6 Dire Concerns

The retroactive ban of Notice of Security Interests presently being fast tracked through parliament (Bill 200) has dire implications for consumers and industry in Ontario. There are a number of simple solutions that the industry has proposed that will achieve the government’s consumer protection goals without creating a severe disruption for consumers and business in the Province. Before we makes a decision on the bill, I ask the government to meet with our industry.

The NOSI is the bedrock of secured home improvement financing in Canada and is used by almost every finance company in Ontario and by 1 in 10 homeowners with less than 0.16% complaints over the past five years. A NOSI provides access to low-cost financing from products in Ontario that range from bathroom renovations, green energy projects to water heaters. 

There has been inadequate consultation with industry concerning any proposed changes made to this system. The current legislation proposing a retroactive abolishment of NOSI’s without a direct and suitable replacement is very concerning and has six immediate consequences:

1) Reduce Open Access to Credit. Eliminating the NOSI will cause financially challenged consumers with poor credit to be denied the ability to lease/finance. The security mechanism was key in leveling the playing field between the rich and poor, providing low-cost financing with quick approvals for customers in need regardless of the consumer’s financial circumstances leaving them out in the cold.

2) Breach Secured Institutional Funding Agreements. Abolishing this security tool will force many creditors into breach of their secured institutional funding agreements. Secured funds allow for relatively low interest rates for home improvement lenders. Remove this and a vast majority of creditors’ loans may be called into default. This presents serious concerns to the reputation and health of the lender ecosystem in Canada.

3) Undermine Existing Agreements. Consumers will interpret the retroactive nature under the bill, and comments made by this government as a signal from the government that they are no longer obligated to honour their agreements. The only recourse, without a NOSI, will be for creditors to negatively report against consumers reducing their credit score and proceed to take legal action.

4) Lead to New Fraud. “The Disappearing Contractor,” was practically eradicated as a function of financing equipment. Without a NOSI, many consumers will be forced to pay cash for equipment, they will search for the lowest price, which in many cases vulnerable consumers end up dealing with fly by night (often unlicensed) companies off kijiji/facebook marketplace for repair/installation of new equipment. This will undoubtedly lead to many customers losing deposits, and/or equipment being installed improperly, unsafely, or not in accordance with code.

5) Cause Needless Litigation. The NOTICE system helps ensure that purchasers of subsequent interest in a property are adequately notified of the lender’s leasehold equipment. This is as much of a diligence tool for prospective buyers as it is for lenders. Removing the “NOTICE”, creates an unbelievable mess moving forward for creditors and consumers alike as a host of priority disputes relating to equipment that did not exist before will fill the courts with senseless litigation that could otherwise be easily avoided through the use of the existing tool

6) Increase Home Costs. NOSIs render new builds more affordable by allowing buyers to finance the cost of critical home equipment over a long period of time. The savings for new home buyers are typically upwards of $30,000—no small figure during a crippling affordability crisis..  

For 50 years the Notice of Security Interests have been the bedrock of our industry allowing consumers access to credit in their homes. Your vote has direct implications for 1 in 10 homeowners, fast tracking this legislation is not in the interest of lenders or consumers and is likely to end with serious unintended consequences. 

We request that the Honourable Member of Provincial Parliament meet with the industry before voting on this bill.