New law aims to protect homeowners from predatory lending schemes

A new law that took effect in Ontario this week aims to crack down on predatory lending schemes that target homeowners, particularly seniors.

The Homeowner Protection Act, 2024, which received Royal Assent on Thursday, bans the registration of what are known as consumer Notices of Security Interest (NOSI) on land title and it deems NOSIs for consumer goods currently registered on title to be expired. 

"Speaker, this is a momentous day," Todd McCarthy, minister of public and business service delivery, said in the Ontario legislature on Wednesday, when the bill passed third reading. "Great work has been done by all members of this assembly to get us to this point."

All the parties at Queen's Park came together to fast track the legislation.

"We consulted in the fall of 2023 across the spectrum, individual families, elderly citizens who had been victimized by this terrible fraud of misuse of NOSIs. The deception and organized criminal activity associated with it was unacceptable," McCarthy said.

McCarthy said the ministry talked to law enforcement, legal professionals, business owners and advocates for consumer groups and elderly people, made a proposal and then it tabled the bill.

"There are times when ideas that are matters that require our urgent attention must be dealt with swiftly. This is one such time."

In a May 27 news release, McCarthy said the law is intended "to protect consumers from fraud and bad actors" who engage in harmful business practices.

"By banning the registration of consumer Notices of Security Interest on land titles, we're putting an end to the exploitation that has targeted our elderly and most vulnerable residents," McCarthy said in the release.

A NOSI is a legal tool — similar to a lien — that puts a financial claim against property titles in Ontario. They are often used by companies that finance or lease equipment such as water heaters or furnaces,to ensure payment.

"While NOSI registrations are intended to help a business protect their interest in those goods, investigations have revealed bad actors use NOSIs to extort exorbitant payments from consumers, particularly seniors. These scams can sometimes involve leveraging the NOSI, or multiple NOSIs, to secure high-interest mortgages on the property, which can ultimately lead to the homeowner losing their property," the government says.

The government said the law doesn't eliminate the security interest of a business in an item and it doesn't invalidate its contract with a consumer. If the consumer defaults on payment, the business could repossess the item and use the courts to seek repayment, the government said.

The Advocacy Centre for the Elderly (ACE), a legal aid clinic for low-income seniors in Ontario, said it is thrilled with the law, but warns that people could still be served with claims by unscrupulous companies from money owing on contracts. It says it's the underlying contracts that people have to think about. It urges people to seek legal advice if they get a claim.

"Our concern is that with the removal of NOSIs (which we are overjoyed about), financing companies are starting to take aggressive enforcement action. Since the financing companies can no longer rely on the NOSIs being paid out when the home is refinanced or sold, they have to commence litigation," Bethanie Pascutto, staff litigation lawyer for ACE, said in an email on Friday.