Financial Leasing Entity Regulations

Financial Leasing Entity Regulations Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 978a of the Bank Actb, 463c of the Cooperative Credit Associations Actd, 1021e of the Insurance Companies Actf and 531g of the Trust and Loan Companies Acth, hereby makes the annexed Financial Leasing Entity Regulations. S.C. 2001, c. 9, s. 183 S.C. 1991, c. 46 S.C. 2001, c. 9, s. 339 S.C. 1991, c. 48 S.C. 2001, c. 9, s. 465 S.C. 1991, c. 47 S.C. 2001, c. 9, s. 569 S.C. 1991, c. 45 Definition of estimated residual value In these Regulations, estimated residual value means, in respect of personal property that is the subject of a financial lease agreement with a financial leasing entity, the value of the property immediately after the end of the lease agreement, as estimated by the financial leasing entity at the time the lease agreement was entered into. Purposes of definition financial leasing entity For the purposes of the definition financial leasing entity in subsection 464(1) of the Bank Act, subsection 386(1) of the Cooperative Credit Associations Act, subsection 490(1) of the Insurance Companies Act and subsection 449(1) of the Trust and Loan Companies Act and in these Regulations, gross vehicle weight means, in respect of a motor vehicle, the gross vehicle weight that is specified by the manufacturer of the motor vehicle as the loaded weight of the motor vehicle, or in the case of a motor vehicle designed to pull a trailer, the motor vehicle with the trailer; and personal household property means personal property that is leased by a natural person under a financial lease agreement or purchased by a natural person under a conditional sales agreement, and intended primarily for the personal use or enjoyment of the lessee or purchaser or of a natural person who is not dealing with the lessee or purchaser at arm’s length. Permitted related activities For the purposes of the definition financial leasing entity in subsection 464(1) of the Bank Act, subsection 386(1) of the Cooperative Credit Associations Act, subsection 490(1) of the Insurance Companies Act and subsection 449(1) of the Trust and Loan Companies Act, a financial leasing entity may carry on the following activities that are related to the financial leasing of personal property: subject to sections 4 to 6, the entering into and the acceptance of assignment of conditional sales agreements in respect of personal property; the administration of financial lease agreements and conditional sales agreements on behalf of any person; and the raising of money for the purpose of financing the activities of the financial leasing entity and the investment of that money pending its use for those activities. Application Sections 5 to 8 apply in respect of the activities of a financial leasing entity that are conducted in Canada. Restrictions and limitations on activities No financial leasing entity may direct its customers or potential customers to particular dealers in respect of personal property that is conditionally sold, or that is to be conditionally sold, under a conditional sales agreement with the financial leasing entity; enter into, or accept assignment of, a conditional sales agreement in respect of a motor vehicle having a gross vehicle weight that is less than 21 tonnes; enter into, or accept assignment of, a conditional sales agreement with a natural person in respect of personal household property; enter into, or accept assignment of, a financial lease agreement or conditional sales agreement other than a financial lease agreement or conditional sales agreement the primary purpose of which is the extending of credit to a lessee or purchaser; enter into a financial lease agreement or a conditional sales agreement in respect of personal property, including personal property that is affixed to real property, that is to be leased or purchased, but not including personal property that was selected by the lessee or purchaser and acquired by the financial leasing entity at the request of the lessee or purchaser, or previously acquired by the financial leasing entity in respect of another financial lease agreement or conditional sales agreement; or enter into a financial lease agreement or conditional sales agreement that entails responsibility on the part of the financial leasing entity to install, promote, service, clean, maintain or repair the property that is the subject of the agreement. Warrantees Every financial lease agreement or conditional sales agreement entered into by a financial leasing entity must include a provision assigning to the lessee or purchaser, or setting out the responsibilities of the financial leasing entity in respect of, the benefit of all warranties, guarantees or other undertakings made by a manufacturer or supplier in respect of the personal property that is the subject of the agreement. Rate of return A financial leasing entity must ensure that every financial lease agreement entered into by it yields a return to the financial leasing entity that is not less than its full investment in the property that is the subject of the agreement; and a rate of return that is reasonable, taking into account the term and the other conditions of the agreement and the rate of return sought by other lessors in respect of the financial leasing of similar property under similar terms and conditions. Factors to be considered For the purpose of subsection (1), the calculation of the return under a financial lease agreement must take into account rental charges that have been or are to be paid by the lessee under the lease agreement; estimated tax benefits accruing to the financial leasing entity on account of the lease agreement, including tax credits and capital cost allowance claims; and either if the lessee or a third party who is dealing at arm’s length with the financial leasing entity has, on or before the commencement of the lease agreement, contracted to purchase the leased property or has unconditionally guaranteed the resale value of the leased property at the date of the end of the lease agreement, the amount of the purchase price or resale value, or in any other case, the amount of the estimated residual value of the property or 25% of the cost of acquisition of the property by the financial leasing entity, whichever is the lesser. Limit The sum of the estimated residual values of all leased properties held by a financial leasing entity that are referred to in subparagraph 7(2)(c)(ii) must not at any time be more than 10% of the sum of the costs of acquisition of those leased properties by the financial leasing entity. Repeal [Repeal] Coming into force These Regulations come into force on the day that subsections 464(1) of the Bank Act, 386(1) of the Cooperative Credit Associations Act, 490(1) of the Insurance Companies Act and 449(1) of the Trust and Loan Companies Act, as enacted by sections 127, 314, 426, and 550 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, come into force. [Note: Regulations in force October 24, 2001, see SI/2001-102.]