New provisions of the Ontario Consumer Protection Act will prohibit a range of door-to-door consumer transactions. The new rules, which come into effect on March 1, 2018, will make unsolicited "direct agreements" for HVAC equipment and other household appliances unenforceable. Newly-released amendments to the CPA Regulation provide details about how the promised ban on door-to-door agreements for these products will be implemented.
Background
Last year, the Ontario government passed Bill 59, titled Putting Consumers First Act (Consumer Protection Statute Law Amendment), 2017. Among the notable provisions of Bill 59 are amendments to Part IV of the Consumer Protection Act that will prohibit most "direct agreements" for prescribed products. Direct agreements are consumer agreements for goods or services where the agreement is entered into in person at a place other than the seller's place of business. Direct agreements are often referred to as "door-to-door" transactions. Currently, the only restriction on direct agreements relates to water heaters.
As we reported earlier, the government's stated intention is to replace the existing ban on direct agreements for water heaters with an updated prohibition against direct agreements for a wider range of household appliances, including water heaters, furnaces, air conditioners and water filters. As of January 2018, we now have more details about the government's plan.
The new rule
The new section 43.1 of the Consumer Protection Act stipulates that no supplier shall solicit or enter into a direct agreement with a consumer for the supply of prescribed goods or services. There is an exception where the consumer has initiated contact with the supplier and has specifically requested that the supplier attend at the consumer's dwelling for the purpose of entering into such an agreement. Simply leaving marketing materials at a customer's home is not considered "solicitation."
Importantly, any direct agreement entered into in contravention of this prohibition is "void." This includes service agreements, sales agreements and consumer leases. Goods or services provided under a "direct agreement" that is void are deemed to be unsolicited and the consumer will not be responsible for any goods received and may be entitled to a refund of amounts already paid (at least for the first year). Furthermore, "related agreements" such as a credit agreement for the purchased good or an agreement under which the consumer gives security for the performance of the obligations in the "direct agreement" will also be void.
In summary, the new section 43.1 of the Consumer Protection Act means the supplier cannot take actions to solicit, negotiate or complete an agreement for prescribed products at the consumer's home unless the consumer has requested the supplier to attend. Otherwise, the consumer may not be bound to the terms of the agreement and may also be allowed to avoid the consequences of related agreements. Clearly, some suppliers will have to update their business practices to be compliant with this new rule. At the same time, parties providing financing for affected transactions will want to confirm and ensure that their sales partners are compliant.
How the new rule will apply
The details about how the new prohibition on "direct agreements" for prescribed goods and services will be implemented are set out in recently-published updated provisions at section 35 of the CPA Regulation.
The key elements are the following: (i) the list of "prescribed goods and services" to which the new rules apply; (ii) the strict conditions setting out which consumer-initiated contacts are not subject to the new rules; and (iii) the record-keeping requirements for each customer-initiated direct agreement.
(i) Prescribed goods and services
- Furnaces
- Air Conditioners
- Air Cleaners
- Air purifiers
- Water heaters
- Water treatment devices
- Water purifiers
- Water filters
- Water softeners
- Duct Cleaning Services
- Any goods/services that are a combination of the above
These are the items to which the new rules apply.
Thus, while the prescriptive rules related to water heater agreements will no longer apply, they are replaced by much broader restrictions. From the list above, it can be seen that new rules relate to a wide range of household appliances currently marketed door-to-door.
(ii) Specific consumer-initiated contacts that are not subject to the new rules
There are some exceptions to the overall ban on direct agreements for prescribed products and services. Generally, if the consumer initiates contact with the supplier and asks the supplier to come to the consumer's home, then the supplier is permitted to solicit and complete an agreement for prescribed goods and services at the consumer's home. The specific applicable circumstances where direct agreements for prescribed goods and services are permitted include scenarios where:
- the consumer has initiated communications by mail, phone or electronic communication with a supplier and has specifically requested that the supplier attend at the consumer's dwelling for the purpose of entering into a direct agreement for the supply of prescribed goods or services;
- the consumer has initiated communications in person with the supplier at the supplier's place of business or at a market place, auction, trade fair, agricultural fair or exhibition and has specifically requested that the supplier attend at the consumer's dwelling for the purpose of entering into a direct agreement for the supply of prescribed goods or services;
- the consumer has responded to a communication initiated by the supplier, other than a communication made in person at the consumer's dwelling, or a communication made during a supplier-initiated phone call, and has specifically requested that the supplier attend at the consumer's dwelling for the purpose of entering into a direct agreement for the supply of prescribed goods or services; or
- a written consumer agreement between the consumer and the supplier for a prescribed good or service is in effect, and then during the course of communications between the parties the consumer invites the supplier to attend at the consumer's dwelling and agrees that the supplier may, while at the consumer's dwelling, solicit the consumer to enter into a direct agreement for the supply of prescribed goods or services.
As can be seen, these exceptions to the general ban against direct agreements for prescribed goods and services permit a seller to respond to a consumer's wish to sign a contract at his or her home, and also recognize that additional direct agreements may be completed between parties that have an existing contractual relationship.
(iii) Record-keeping requirements for each customer-initiated contract
Where a supplier enters into a direct agreement with a consumer for the supply of prescribed goods or services under one of the exceptions set out above, the supplier must maintain records of the consumer-initiated contact for three years from the date of entering into the agreement.
When the new rule will apply
The new section 43.1 of the Consumer Protection Act, along with the complementary amendments and additions to the CPA Regulation, comes into force on March 1, 2018. This means that all suppliers must adapt their practices in advance of that date. It can be expected that there will be public notice to inform consumers of the changes as they come into effect.
There may be further changes to the CPA Regulation related to permitted direct agreements for prescribed goods or services. If the model that currently applies to water heater agreements is a guide, then we may see the government prescribe the form and/or content for such agreements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
