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Bill C-421

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1st Session, 36th Parliament,
46-47 Elizabeth II, 1997-98

The House of Commons of Canada

BILL C-421

An Act to amend the Interest Act (interest payable on repayment of a mortgage loan before maturity)

R.S., c. I-15; 1992, c. 1; 1993, c. 28; 1996, c. 17

      Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

1. The Interest Act is amended by adding the following after section 9:

When no further interest payable

9.1 (1) Whenever any principal money or interest secured by mortgage on real property is not, under the terms of the mortgage, payable by a natural person before a time at least one year and no more than five years after the date of the mortgage, then, if at any time before the expiration of this period, any natural person liable to pay or entitled to redeem the mortgage tenders or pays, to the person entitled to receive the money, the amount due for principal money and interest to the time of payment, as calculated under sections 6 to 9, together with the prescribed interest in lieu of notice, no further interest shall be chargeable, payable or recoverable at any time thereafter on the principal money or interest due under the mortgage.


(2) Nothing in this section applies to any mortgage on real property given by a joint stock company or other corporation, nor to any debenture issued by any such company or corporation, for the payment of which security has been given by way of mortgage on real property.


(3) The Governor in Council may make regulations fixing the rate of interest payable under subsection (1) and the method of calculating it.

2. The Act is amended by adding the following after section 10:

When no further interest payable

10.1 (1) Where a financial institution makes a loan to a natural person of five hundred thousand dollars or less, secured by a mortgage on property and required to be repaid either on a fixed future date or by instalments, the financial institution shall disclose to the borrower, in accordance with the regulations, whether the borrower has the right to repay the amount borrowed before the maturity of the loan and, if so

    (a) particulars of the circumstances in which the borrower may exercise that right, and

    (b) the prescribed amount of interest re ferred to in sections 9.1 and 10 in lieu of notice and the manner in which the interest is calculated.


(2) Subject to subsection (3), the Governor in Council may make regulations respecting such other matters or things as are necessary to carry out the purposes of subsection (1).

Information to be included

(3) Regulations made under subsection (2) shall provide that the information to be communicated by the financial institution shall be included in the mortgage document and expressed in plain language in terms generally understood by the public.

Definition of ``financial institution''

(4) For the purposes of this section, ``financial institution'' means a bank to which the Bank Act applies, a company to which the Trust and Loan Companies Act applies and a foreign company to which the Insurance Companies Act applies.

Offence and punishment

10.2 (1) Every person who, without reasonable cause, contravenes any provision of section 10.1 or a regulation made under this section is guilty of an offence punishable on summary conviction and liable on summary conviction

    (a) in the case of a natural person, to a fine not exceeding $100,000 or to imprisonment for a term not exceeding one year, or to both; or

    (b) in the case of a corporation, to a fine not exceeding $500,000.

Liability of officers and directors

(2) Where a corporation commits an offence under subsection (1), any officer or director of the corporation who is in a position to direct or influence the policies of the corporation in respect of conduct prohibited by this section is a party to and guilty of the offence and liable to the punishment provided for the offence, whether or not the corporation has been prosecuted or convicted, unless the officer or director establishes that the officer or director exercised due diligence to prevent the commission of the offence.

Order to comply

(3) Where a person has been convicted of an offence under subsection (1), the court may, in addition to any punishment it may otherwise impose, order the person to comply with the provisions in respect of which the person was convicted.

Effect of offence on contracts

(4) A contravention of section 10.1 or the regulations made thereunder does not invalidate any contract entered into in contravention of the provision.