Ontario’s Consumer Protection Act, 2002 provides special protection for consumers purchasing prepaid services. Known as personal development services under the Act, they include:

• health or fitness club memberships,
• diet counselling,
• talent development, modelling lessons, or “personal representation” by an agency, and
• sports club memberships, dance lessons, or martial arts training.

Cancelling a prepaid contract

10-day cooling-off period

The Act requires that any prepaid goods or services with a value of over $50 must have a written contract. It is a “prepaid contract” when any part of the contract occurs in the future. The contract must have complete details of the transaction and full disclosure of any credit terms.

If you sign a contract for a prepaid service, such as a gym membership, but then change your mind, under the Act you have a 10-day cooling-off period in which you can cancel your membership, without a reason, for a full refund and with no penalty, by giving the operator of the business you dealt with a written notice of cancellation.  The contract must be cancelled within 10 days of signing the contract, or 10 days after the services become available, whichever happens later. Notice of the cancellation must be in writing and delivered to the business within the 10-day period. It is advisable to keep a copy of the written cancellation and the proof that it was delivered.

Cancelling after 10 days

If the 10-day cancellation period has ended yet you still wish to cancel the contract, you may be able to do so. If you did not receive a copy of the contract, you have one year from the date you entered into the agreement to cancel it.

The contract can also be cancelled if it does not meet the requirements to be valid. For the contract to be valid, it must contain certain information, including:

• your name and address and the name and address of the other party to the contract,
• a description of the services purchased and the price,
• a description of any guarantees, or a statement that that are no guarantees,
• the number and amount of payment installments, if any,
• any extra charges for paying by installment, and
• if any of the services are not available when the contract is signed, the date they will become available.

If the contract does not include all the necessary information, it cannot be enforced.

How long can prepaid contracts last?

Contracts for prepaid services can last no longer than a year, but they can be renewed automatically. An operator of a business who wants to renew a contract must give you written notice at least 30 (but not more than 90) days before the contract expires. If you don’t want a contract renewed, give the business written notice before the contract runs out.

What if you were misled, cheated, or taken advantage of by the salesperson?

As a rule, consumers in Ontario have the right to cancel a contract for goods or services if an “unfair practice” led to the sale. Unfair practice means lying to or misleading customers, or behaving unethically in other ways. It applies to all consumer sales, including door-to-door and prepaid services.

The law defines two kinds of unfair practice. The first involves making false or misleading statements. For example:

• Stating that the quality of a product or service is better than it really is,
• Suggesting that service or repair is needed when it’s not,
• Saying that the supplier belongs to, or represents, a particular organization, if this is not true,
• Saying there is a specific cost saving, if this is not true, or
• Not informing consumers of an important fact.

The second kind of unfair practice is referred to as “an unconscionable consumer representation.” This unethical practice happens, for example, if sales staff:

• take advantage of a consumer’s reading problems, language difficulties, or mental or physical disability,
• grossly overcharge the consumer,
• impose terribly unfair terms of sale, or
• put far too much pressure on the consumer.

If you signed a contract as a result of an unfair practice, you have the right to cancel within one year. This must be done in writing. If you have already received part of the service you paid for, you may be able to claim the difference between what you paid and the value of what you received. Send a letter to the other party by registered mail or deliver it in person. Say that you are cancelling the contract because of an unfair practice and explain why. Keep a copy of the letter.

If you do not get your money back, you can sue the business. On the other hand, if you still owe money according to the contract and you stop making payments, you might be sued. If this happens, you can defend your actions by proving in court that you were the victim of an unfair business practice. You can use this defence even if more than one year has passed since you signed the contract.

If you believe you are the victim of an unfair practice, you should get legal advice about your situation.

What to know before signing a contract

Before signing a contract to purchase goods or services, make sure you are agreeing to what you actually want. Read the contract carefully from beginning to end, including the back and fine print. A contract is a legally binding agreement, therefore it is important that you know what is in it. If you want time to think about the terms of the contract, or if you don’t understand everything it says, don’t sign right away. Ask for a copy to read on your own, or with someone who can explain it.

Get help

For more information about your rights as a consumer, visit Consumer Protection Ontario.

If you believe you are entitled to a refund but the business is refusing to cancel your contract and return your money, you may be able to bring a Small Claims Court action if the amount is $35,000 or less.  If you require legal advice, you should consult a lawyer or paralegal.

If you are having financial difficulties and want to clear your debt and repair your credit, you can get help. For easy-to-understand debt solutions on your terms, contact our preferred experts 4Pillars and rebuild your financial future. With 60 locations across Canada, they will help you design a debt repayment plan and guide you with compassionate advice. No judgment. For help, visit 4Pillars or call toll-free 1-844-888-0442 .

								
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