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1 This webinar is brought to you by CLEONet CLEONet is a web site of legal information for community workers and advocates who work with low-income and disadvantaged communities in Ontario.

2 About our presenter Margaret Capes, B.A. (Hons.), LL.B., M.Ad.Ed, is Legal Education Coordinator of Community Law School (Sarnia- Lambton) Inc. She also acts as Review Counsel for Community Legal Services, as an adjunct professor in the clinical law program, and as faculty advisor for Pro Bono Students Canada and the Dispute Resolution Centre, all at the Faculty of Law, University of Western Ontario. She is the former Executive Director of Community Legal Assistance Sarnia.

3 Hot Topics in Consumer Protection: Personal Development Service Agreements

4 Webinar Overview 1. Governing Law: the Consumer Protection Act, Examples of Prepaid Membership Agreements 3. Exceptions to Coverage Under the Act 4. Consumer Rights Regarding Personal Development Service Agreements: Freedom from Unfair Business Practices Contract Requirements Cooling-off Period Payment of Fees Extension or Renewal Presold Memberships Warranty and Waivers Unsolicited Goods or Services 5. Consumer Remedies Cancellation Rescission Complaint to the Ministry Civil Lawsuit 6. Appendix 7. Closing

5 The Consumer Protection Act, 2002 and Personal Development Service Agreements Personal development service agreements are governed by provincial law. In Ontario, the Consumer Protection Act, 2002 is the governing law that protects consumers. The CPA covers any agreement, the cost of which is more than $50. The CPA both sets affirmative requirements for agreements it governs and prohibits a variety of unfair business practices, all of which we will discuss in further depth.

6 Examples of Personal Development Service Agreements The CPA defines personal development service agreements (sometimes called prepaid membership agreements) as services that are provided for: Health, fitness, diet, or matters of a similar nature; Modeling and talent; Martial arts, sports, dance, or similar activities; and Any facility provided for instruction, or for the provision of services.

7 Exceptions to Coverage Under the CPA Certain types of clubs and activities are excluded from the Act s definition of a personal development service agreement, and are therefore exempted from the provisions of the Act. They are: Nonprofit or cooperative organizations; Private clubs primarily owned by the members; Charitable or municipal organizations, and any agency of the Province of Ontario; and Golf clubs.

8 Consumer Rights: Freedom From Unfair Business Practices The Consumer Protection Act, 2002 specifically prohibits two types of unfair business practices, which we will discuss in more detail shortly: Making a false, misleading or deceptive representation, and Making an unconscionable representation.

9 Unfair Business Practices: False, Misleading or Deceptive Representations False, misleading and deceptive representations fall generally into four categories: Representations as to the quality, characteristics, condition, or special nature of the goods or services; The current or future availability of the goods or services; The need for the goods or service; and The cost, price advantage, or benefit of the good or service to the consumer. Please refer to the Appendix for more a detailed list of false, misleading, and deceptive representations as defined by the CPA.

10 Unfair Business Practices: Unconscionable Representations Some business practices are so egregious that they are deemed unconscionable under the CPA. They include: Taking advantage of the disability, ignorance, language barriers, or illiteracy of the consumer; Grossly overcharging for the good or service; Using excessively one-sided or otherwise inequitable contracts to the detriment of the consumer; Obligations that the consumer has no reasonable probability of paying in full; Misleading statements of opinion that the consumer relies on or is likely to rely on, to their detriment; and Using pressure tactics to persuade the consumer to enter into the transaction.

11 Consumer Rights: Contract Requirements The CPA requires all personal development service agreements to include: The name of the consumer; The name, address, and telephone number of the service provider, any other contact information such as facsimile number or address, and if different, the name under which the provider carries on business; The name of the person(s) who solicited, negotiated, or concluded the agreement with the consumer; The address of the facility at which the services will be available; A full description of the services purchased; The date on or by which each of the purchased services will be available;

12 Consumer Rights: Contract Requirements, Cont. The total amount payable, and the terms and method of payment; The date the agreement is entered into, and the commencement and expiry dates; Any renewal or extension provisions; and A statement of consumer rights as prescribed by the CPA, in a font size of not smaller than 10, with a heading of font size not less than 12. Special provisions are required if the agreement: includes a trade-in arrangement; if the service will not be available at the time a payment for the service is required; if there are renewal or extension provisions; and/or if goods are to be provided as part of the agreement.

13 Consumer Rights: Cooling-off Period The CPA provides for an automatic 10-day cooling-off period. May cancel for any reason within 10 days of receipt of a written copy of the agreement, or within 10 days of the date that the services in the agreement become available, whichever is later. Consumer is not required give a reason for canceling. Consumer may not be charged a penalty for canceling. May cancel within one year of entering into the agreement if a copy of the agreement is not received. Any method may be used but written notice (facsimile, registered mail, or personal, receipted delivery) is recommended. Sample cancellation letters are available on the Ministry of Consumer Services website

14 Consumer Rights: Payment of Fees If a club or service charges initiation fees in addition to the membership fee, the initiation fee may not be more than twice the annual membership fee. Only one initiation fee may be charged to the consumer. A club or service must offer the option of paying membership fees and any initiation fee in monthly installments. An extra fee may be added for an installment payment option, but that fee may not be more than a 25 percent increase over what the upfront, lump-sum fee would be. This gives the consumer a means of protecting against potential bankruptcy of the facility and loss of a full year s prepaid fees.

15 Consumer Rights: Extension or Renewal A personal development services contract cannot have a term longer than one year. If the consumer wishes to continue the membership or services, she or he must renew the contract. If the contract contains an automatic renewal provision: The service provider must give advance notice at least 30 days but not more than 90 days before the renewal date; The notice must give the renewal date, and clearly note any changes that are being made to the agreement; The consumer has the right to not renew the agreement by so notifying the service provider. If a membership agreement is renewed without proper notice having been given, the consumer may cancel the contract at any time and demand return of any prepaid but unused fees.

16 Consumer Rights: Presold Memberships The CPA affords special protections for consumers who join a club that has not yet opened: Owners may pre-sell memberships before a club is open, but the membership fees collected must be held by a registered trust corporation that acts as a trustee. The trustee may not release the funds until the personal development services are made available to the consumer (e.g., the club opens to members). If there is a delay in opening, the consumer may cancel the membership and demand a refund of prepaid fees.

17 Consumer Rights: Warranty and Waivers The CPA requires that services provided under a personal development service agreement must be of a reasonably acceptable quality. This creates a minimum warranty on behalf of the consumer, and gives the consumer the right to void the agreement if the services fail to meet the minimum standard. The CPA also prohibits certain contract provisions. An agreement may not constitute a waiver of the consumer s substantive or procedural rights under the Act. For example, a contract cannot state that the consumer waives his or her right to cancel during the cooling-off period. Also, if a service provider makes a unilateral change to the terms of the contract, the consumer must be notified of the change and consent to it. For example, membership fees cannot be increased and the higher fee imposed on a consumer without giving notice to the consumer and obtaining the consumer s consent to pay the higher the fee

18 Consumer Rights: Unsolicited Goods or Services A company may not bill a consumer for goods or services that were not requested, or for goods or services that are different from those originally agreed upon. The consumer is not required to pay for such goods or services, and may demand a refund if what was delivered is not what was agreed upon and the consumer has prepaid. A consumer who has made payment for unsolicited goods or services may demand a refund within one year of having made the payment. As with all notices, the consumer should make a refund demand in writing and use a delivery method that will give the consumer proof that the notice was given.

19 Consumer Remedies: Cancellation A consumer may cancel a personal development service agreement, without penalty, at any time during the cooling-off period. The consumer may give any type of cancellation notice, but written notice by any method that gives the consumer proof that notice was given is recommended. A sample cancellation letter is available on the Ministry of Consumer Services website. Cancellation operates to cancel the agreement as if it never existed. All sums paid by the consumer must be refunded if the agreement is cancelled. If the seller refuses to issue a refund, a consumer may complain to the Ministry, or commence a civil action under the CPA.

20 Consumer Remedies: Rescission A consumer may rescind any agreement entered into while the other party engaged in an unfair business practice under the Act. If rescinded, the agreement and all related agreements, guarantees, and payment security are cancelled as if they never existed. Notice of rescission must be given within one year after entering into the agreement (written notice is recommended). If rescission is not feasible, the consumer may recover the amount by which payment exceeded the actual value of the goods or services, or damages, or both. Sample rescission letters are available on the Ministry of Consumer Services website. If the consumer does not get a satisfactory response from the seller, he or she may complain to the Ministry, or commence a civil action under the CPA.

21 Consumer Remedies: Complaint to the Ministry If the service provider refuses to remedy the matter, the consumer should report the problem to the Ministry of Consumer Services. Online complaint forms are available on the Ministry s website. The Ministry has broad investigative and remedial powers. The Ministry may order the seller to comply with the provisions of the Consumer Protection Act, The Ministry may also bring charges in Provincial Offences Court. The Provincial Offences Court may, upon conviction, impose upon an individual a fine of up to $50,000, or imprisonment for a term of not more than two years less a day, or both. A corporation that is convicted may be fined up to $250,000.

22 Consumer Remedies: Civil Lawsuit If the consumer has given notice of cancellation or rescission but has not received a satisfactory response, he or she may commence a civil suit. Exemplary or punitive damages may be awarded in such a suit, in addition to any other remedy that may be available. As private lawsuits are expensive, a consumer may want to first file a complaint with the Ministry of Consumer Services to see if that results in acceptable redress for the consumer.

23 Appendix: False, Misleading, and Deceptive Representations While not intended to preclude actions based upon other representations that would qualify as unfair under the Consumer Protection Act, 2002, the following are specifically mentioned as examples of false, misleading, or deceptive representations: That the goods or services have sponsorship, approval, performance characteristics, accessories, uses, ingredients, benefits, or qualities that they do not have; That the person supplying the goods or services has sponsorship, approval, status, affiliation or connection that the person does not have; That the goods or services are of a particular standards, quality, grade, style, or model, if they are not; That the goods are new, or unused, if they are not or are reconditioned or reclaimed; That the goods have been used to an extent that is materially different from the fact;

24 Appendix: False, Misleading, and Deceptive Representations, cont. That the goods or services are available for a reason that does not exist; That the goods or services have been supplied in accordance with a previous representation, if they have not; That the goods or services, or any part thereof, are available when the person making the representation knows or should know that they are not; That the goods or services, or any part thereof, will be available by a specified time when the person making the representation knows or should know that they will not be available by that time; That a service, part, replacement or repair is needed or advisable, if it is not;

25 Appendix: False, Misleading, and Deceptive Representations, cont. That a specific price advantage exists, when it does not; That misrepresents the authority of a salesperson, representative, employee, or agent to negotiate the final terms of the agreement; That the transaction involves or does not involve rights, remedies, or obligations if the representation is false, misleading, or deceptive; That misrepresents the purpose or intent of any solicitation of, or communication with, a consumer; That misrepresent the purpose of any charge or proposed charge; or That misrepresents or exaggerates the benefits that are likely to flow to a consumer if they help a person obtain new or potential customers.

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