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Consumers - Credit

Credit cards

Credit cards are popular, and with good reason. If you have a credit card, you can avoid the risk of carrying large amounts of cash. They also come in handy for unexpected purchases and outings. Most people use credit cards on a regular basis. But few people know their rights and obligations concerning this type of contract of credit. In order to protect consumers, the Consumer Protection Act imposes obligations on credit card companies.

In the Infosheet, Éducaloi explains your rights and obligations concerning credit cards.

What is a credit card?

A credit card is, in legal terms, a contract extending variable credit.
A contract extending variable credit is a contract in which a merchant gives a credit of money in advance to a consumer. The consumer then has the power to decide when to use the credit, how to use it, and whether to use all of the credit or only a portion of it.

In return for this credit, the consumer must regularly pay the balance of his expenses and any applicable credit charges.

A contract extending variable credit has two characteristics:

• the amount of credit is not fixed (the credit depends on the purchases made by the consumer);
  
• it does not have a precise duration (the consumer decides when to pay back the credit).

Can a credit company send me a credit card even if I didn’t apply for it?

No. The law prohibits companies that issue credit cards from sending you a credit card if you have not applied for it. Nor can a company renew or replace your credit card if you have cancelled the card by written notification. Finally, a company is not allowed to issue more than one credit card with the same number, unless you request otherwise in writing.

What should a contract extending variable credit include?

Like all credit contracts, a contract extending variable credit must be made in writing and include the following information:

• your name and address;
  
• the issuing company’s name and address;
  
• the date and location of the contract;
  
• the maximum amount of credit to which you are entitled;
  
• registration and renewal fees;
  
• the duration of each period for which the company will issue a statement of account;
  
• the minimum payment required for each period;
  
• the time limit for the consumer to fulfill his obligation without being required to pay credit charges;
  
• the annual credit rate expressed as a percentage.

For credit card contracts, neither the merchant nor the consumer need sign anything. A merchant’s issuance of a card represents the merchant’s signature, and the consumer’s use of the card represents his signature.

Must I always pay interest if I have a credit card?

No. Interest charges are calculated on the previous month’s unpaid balance. If you pay your balance in full, you won’t have to pay any interest. Be careful when shopping for credit cards. Some have extremely high interest rates.

What should I do if my credit card is lost or stolen?

As soon as your credit card is lost or stolen, immediately call your issuing company. Once they are notified of the loss or theft, the company cannot oblige you to pay for any charges placed on your card.

Even if you forget to report a lost or stolen card to your issuing company, the law states that the most you have to pay after the loss or theft will be $50.
This $50 limit doesn’t apply if you use your credit card like a debit card (i.e. if you have a PIN on your credit card). In that case, you are entirely responsible for any losses that happen in case of theft or loss of the card.

Must the company send me a statement of account every month?

Yes. The company must send you a statement of account at least 21 days before the company can impose credit charges for unpaid amounts. If you want, you can ask the issuing company to send you copies of the bills of every transaction posted to your account (by law, the company must do this for free). A statement of account must include the following information:

• the date of the end of the period;
  
• the balance of the account at the end of the preceding period, specifying the portion of the balance which represents cash advances;
  
• the date, description, and value of each transaction debited to the consumer’s account during the period, unless the merchant appends a copy of the bills to the statement of account;
  
• the date and amount of each payment made or sum credited during the period;
  
• the credit charges required during the period;
  
• the balance of the account at the end of the period;
  
• the minimum payment required for such period;
  
• the time limit during which the consumer can pay without being subjected to interest charges (except on cash advances).

If you don’t receive a statement of account, the company cannot charge you interest on the unpaid balance. However, if your statement didn’t arrive because you moved without notifying the credit company of your new address, you must pay the interest.

What should I do if an error appears on my statement of account?

If you notice an error on your statement of account, contact the company that issued the card in writing as soon as possible. Provide the following information:

• your name;
  
• the error and the amount of money in question;
  
• your reasons to believe an error has been made.

The company then has sixty (60) days to correct the error or to refuse to correct the error. If the company refuses, it must provide you with copies of proof showing that you are indeed responsible for the amount being charged.

If the company fails to respond to your notification within sixty (60) days, it cannot charge you for the erroneous amount or any interest on this amount.

It’s a good idea to keep track of your credit card bills and always verify your statements of account.

Must I have insurance to obtain a credit card?

No. But some issuing companies require you to hold life insurance so they will still receive payment in the case of your death.

If the credit company requires you to have insurance, you can use an existing insurance that you already hold. Remember, a credit company cannot refuse to give you credit simply because you refuse to buy insurance from their company.

Can the company unilaterally increase my credit limit?

No. The company that issues the credit card must obtain your consent before increasing your credit limit.

Can someone who is less than eighteen years old have her own credit card?

Generally no. Most credit card companies require the principal cardholder to have reached the age of majority.

However, a company can decide to issue a credit card to a minor if it is satisfied with the minor’s financial situation or if the minor’s parents agree to guarantee the card (“endorse” it).

If a minor lies about her age to get a credit card, her parents can try to come to an agreement with the financial institution. The financial institution could agree to cancel the contract after seeing proof that the young cardholder is not 18 years old. However, if the financial institution decides to uphold the contract, the parents will have to have the contract cancelled by a court by proving that their child does not have the financial means to have a credit card.

However, just because a card is cancelled doesn’t mean that all the transactions made with the card are also cancelled. The minor must pay for each of these transactions… or her parents must go to court to have the contract cancelled.

Useful Links :

1. Office de la protection du consommateur website  [http://www.opc.gouv.qc.ca]