Lender Disclosure Obligations Confirmed

On March 28, the Supreme Court of Canada dismissed the application for leave to appeal in Solar Power Network Inc., et al. v. ClearFlow Energy Finance Corp. The Ontario Court of Appeal's 2018 decision stands. This is welcome news for lenders. It confirms that longstanding and widely used interest rate disclosure practices satisfy the requirements of section 4 of the federal Interest Act.

What you need to know

• Formulas can satisfy the requirement to disclose an equivalent yearly interest rate. Where a contract specifies that interest is payable at a rate for "any period less than a year," section 4 of the Interest Act requires disclosure of an equivalent annual rate. The application judge's decision in Solar Power cast doubt on whether annualizing formulas—widely used in the lending industry—could satisfy this requirement. The Court of Appeal has confirmed that a formula which converts a daily interest rate to an equivalent annual rate can satisfy section 4.¹