Bill C-606: An Act to amend the Interest Act (prepayment charge)

C-606 Second Session, Forty-first Parliament, 62-63 Elizabeth II, 2013-2014 HOUSE OF COMMONS OF CANADA BILL C-606 An Act to amend the Interest Act (prepayment charge) first reading, May 29, 2014 Ms. Liu 412033 SUMMARY This enactment amends the Interest Act in order to set out the maximum charge that a lender can exact for prepayment of a loan secured by a first mortgage or hypothec on property that is used as a family residence. It also sets out the conditions under which such charges are not allowed. Available on the Parliament of Canada Web Site at the following address:http://www.parl.gc.ca 2nd Session, 41st Parliament, 62-63 Elizabeth II, 2013-2014 house of commons of canada BILL C-606 An Act to amend the Interest Act (prepayment charge) R.S., c. I-15 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 10: Prepayment charge 11. (1) Whenever any principal money or interest is secured by a first mortgage on real property or a first hypothec on immovables, if the mortgage or hypothec encumbers any property used as a family residence and if, under the terms of the mortgage or hypothec, the lender may, in the case of prepayment, exact a charge in respect of interest accruing, then (a) that charge may not exceed the lesser of the following amounts: (i) an amount equal to three months interest on the outstanding principal calculated at the average rate provided for in the mortgage or hypothec, and (ii) an amount equal to the balance of the interest otherwise payable on the outstanding principal under the terms of the mortgage or hypothec; and (b) no charge may be exacted if the prepayment is made as the result of the sale of the property used as a family residence following (i) the workplace relocation or forced termination of the borrower or the borrower’s spouse, (ii) the serious illness or death of the borrower or the borrower’s spouse, or (iii) the separation or divorce of the borrower and the borrower’s spouse. Deduction in calculation of charges (2) When calculating the charge in respect of interest accruing, any amount that the borrower is entitled to repay annually without penalty must be deducted from the outstanding principal. REGULATIONS Regulations 12. The Governor in Council may make regulations prescribing any matter required or authorized by this Act to be prescribed. Published under authority of the Speaker of the House of Commons