In the wake of a number of mortgages being registered recently in Manitoba with unusually high interest rates, the province’s Consumer Protection Office is urging caution for people when they buy a home or use their home as collateral for a loan, such as a car loan.
The Consumer Protection Act requires lenders to give borrowers important information about their loan or mortgage before they sign the agreement, including the amount of interest, details on optional services and information on any default charges.
The Consumer Protection Office reminds Manitobans that:
• Borrowers should shop around for the best deal. Pay attention not only to the interest rates, but also the fees charged by the lender for paying off the mortgage early, documentation and mortgage registration and discharge. All this information must be disclosed in the credit agreement.
• Lenders must give borrowers an initial disclosure statement that can be reviewed prior to signing the credit agreement.
• Credit agreements must also clearly state the payment amount and schedule, the cost of credit and the annual percentage rate.
• Consumers have the right to take a copy of the initial disclosure statement away with them to review, or have a third-party review, before signing on the dotted line.
Using a home as collateral for a small loan, such as a car loan, can put consumers at risk of losing their home if they cannot make payments on the loan. Consumers can protect themselves by:
• Never signing or initialing blank papers or papers with blank spaces. Consumers should walk away from any business that asks them to sign blank documents.
• Asking the lender to fully explain anything about the credit agreement they do not understand or anything in the agreement they did not agree to.
• Ensuring they ask for and receive copies of the signed credit agreement before leaving the lender’s place of business;
• Making sure that if there are any changes to be made to the agreement, the lender provides a new initial disclosure statement and credit agreement that reflects the changes; and
• Not being pressured into signing any document or agreement. If consumers are feeling pressured or confused by the process, they can take their business elsewhere.
Approximately 52,000 mortgages are registered each year in Manitoba. According to the Bank of Canada, the average residential mortgage lending rate for a five-year mortgage in 2011 ranged from 4.35 per cent to 4.87 per cent.
In some situations, if a lender does not follow the laws by not disclosing certain information prior to a borrower signing the mortgage, the borrower may be entitled to financial relief. In addition, anyone found guilty of having breached the Consumer Protection Act may be subject to fines up to a maximum $300,000. They may also be ordered by the courts to pay restitution.
Borrowers and lenders interested in knowing more about credit information rules can contact the Consumer Protection Office at 204-945-3800 or 1-800-782-0067 (toll-free), or by e-mail at firstname.lastname@example.org