If the dealer assists a consumer in arranging financing for a vehicle, it is the dealer’s obligation to ensure the consumer receives an Initial Disclosure Statement (IDS) or a Lease Disclosure Statement (LDS). Typically these are given when the consumer agrees to purchase or lease. It is an offence under the Consumer Protection Act, 2002 if the dealer fails to deliver an IDS or an LDS to the consumer at or before the time the consumer enters into the agreement.
The IDS must include:
- What the consumer will receive from the lender, including when and how they will receive it (e.g., the vehicle, cash rebate, payment of warranty premiums or other fees, etc.).
- The term of the agreement (e.g., three years).
- The cost of borrowing.
- The amortization period if different from the term (in motor vehicle transactions, the amortization period and the term are usually the same).
- The interest rate.
- If the interest rate may change during the term of the agreement, an explanation of those details.
- When the lender will start charging interest.
- When interest will be compounded.
- Any other payments the consumer must make as a condition of borrowing (other than the interest).
- The details of any grace period under the agreement (e.g., if there is no interest for the first year of the agreement, a detailed description of how this works).
- The annual percentage rate.
- Information about optional services (e.g., price, description, termination rights, etc.) if the dealer has not provided the consumer with a separate statement about these services.
- The total of all payments the consumer is required to make.
- If the consumer is not required to make regular payments, a description of how he or she is required to make payments.
- An explanation of how each payment will be applied to the outstanding principal and interest.
- Any prepayment rights, charges or penalties.
- Required refund if consumer pays full balance early.
- Charges the consumer will need to pay if he or she does not comply with his or her responsibilities under the agreement.
- If there is mandatory insurance, an explanation that the consumer does not have to buy insurance through the dealer.
Including Multiple Agreements in the LDS
If the consumer signs more than one agreement (e.g., a lease and a bill of sale), the information required in the Lease Disclosure Statement (LDS) should be included in both documents to ensure there is no confusion. If it is not possible to include all the details in both agreements, the dealer could include a statement that the consumer has received the detailed information on a separate agreement (and have the consumer initial that statement).
Ultimately, it is the dealer’s responsibility to ensure the consumer has received this information in a clear, comprehensible and prominent fashion in accordance with the Act.