The recent decision of the Ontario Superior Court in De Wolf v. Bell ExpressVu has been hailed, at least by the plaintiff, as a win for the consumer. Myself, I admit to some doubts: the reasoning of the decision suggests that any victory is Pyrrhic at best.
For those who haven't read the decision, the plaintiff challenged Bell ExpressVu's practice of charging an "administration fee" of $25 on delinquent accounts, on the basis of the Criminal Code prohibition of "interest" exceeding 60%. Bell argued – and, in fact, the court agreed – that the fee was a fair estimate of Bell's collection costs. However, the crucial factual element for the analysis was that Bell charged the $25 fee after 60 days, but only disconnected service after 75 days. Consequently, for fifteen days the customer continued to enjoy Bell's service while delaying payment: in effect, Bell was "advancing credit" within the meaning of section 347 of the Criminal Code.
The legal analysis is interesting, but what especially strikes me about this decision is its potentially perverse ramifications for consumers. The application of section 347 to late fees and similar charges has been defended on consumer protection grounds, notwithstanding that the section was intended as a tool to fight criminal loan-sharking. Yet what might be the practical result in this case? One simple way for Bell to comply with the effect of the decision would be to change its policy so that service is disconnected after 60 days, since any additional grace period alters the legal characterization of its fee from cost recovery to usury. (No good deed goes unpunished, it would appear.)
In my view, section 347 is a terribly blunt instrument to use for this type of situation, even if one accepts that such late fees are a policy problem worth addressing. Is there a better approach? Could one add additional carve-outs for consumer contracts regulated by provincial law, similar to the one recently added for payday lenders? Could one add a defence, along the lines argued by Bell, that "interest" should exclude any fee that represents a reasonable estimate of the costs incurred by one party where the other party breaches its payment obligations, even where the first party continues to provide the goods or services under the contract? Should the section simply be repealed entirely as creating more problems than it solves?