Spam Bill C-28 – Lender & Broker Implications

Canadian Mortgage Trends – April 21, 2011

Canada recently enacted a new anti-spam law called Bill C-28. It’s expected to come into force later this year.

Proponents say C-28 will lighten the spam load on all of us.

At the same time, it could turn many businesspeople into spammers themselves!

As a mortgage broker, for example, it’s not uncommon to send out e-mails or newsletters to current or former clients. In some cases, you may not have had contact with a client for years.

If that kind of scenario applies to you, C-28 will change your email habits. For brokers, mortgage specialists and lenders, it pays to know the implications in advance.

Here are a few key points about Bill C-28:

* It was formerly known as the “Fighting Internet and Wireless Spam Act” (FISA)
* Royal Ascent was granted in December and it’s anticipated to come into force in late summer/early fall.
* Enforcement is overseen by the CRTC, Competition Bureau and Office of the Privacy Commissioner
* Violators could see fines as high as $1 million for an individual or $10 million per violation for an organization
* The bill is broadly-defined to include all commercial electronic messages, which include email, SMS text, sound, voice or image messages.

“It’s going to have a significant impact on the mortgage broker side of things, but also for anybody who sends messages that have a commercial purpose, in whole or in part,” said Nicole Kutlesa, a senior associate with Osler, Hoskin & Harcourt LLP in Toronto.

Red email connection symbol key on a laptop“It introduces an entirely new standard in terms of consent that we didn’t have in Canada previous to this legislation.”

The key to this legislation is that is introduces a standard of express, or “opt-in” consent, Kutlesa says. “That’s pretty significant and different from what companies are doing today.”

Here’s how it works:

If you have an existing business relationship with a client (eg. you’ve sold them something or have brokered their mortgage), you are permitted under this legislation to send commercial electronic communications to that person for the duration of the working relationship, even if the messages are unrelated to the deal.

For brokers, Kutlesa said the business relationship would last for the duration of the mortgage term, as long as it’s not renegotiated early elsewhere.

At the end of the business relationship, you still have up to two years to send them commercial communications without the need for further consent.

By the end of the second year, however, you’ll need the express consent from that client that they want to continue receiving your communications. The exception is when you’ve engaged in another commercial activity with that client, in which case consent can be implied under the legislation. Kutlesa said this can be done in the form of a check-box embedded in the communication, though it’s important the box is left blank until it is checked by the client (hence the “opt-in” criteria).

What’s important in all cases is that the communication you send, be it an e-mail, e-newsletter or other electronic marketing material, needs to identify yourself, include contact information (which must be valid for at least 60 days after the message was sent) and an unsubscribe mechanism in accordance with the legislation.

Spam1“It’s very serious because the penalties under the statute are significant,” Kutlesa said, referring to the maximum fines of $1 million for individuals and $10 million for companies found in violation of the law. On top of that, the bill allows for both a private right of action (if there have been losses or damages as a result of an unsolicited message), as well as directors and officers liability.

While Kutlesa says the intent of the legislation is to crack down on real spammers, she said that doesn’t mean the enforcement authorities wouldn’t be willing to make an example of a legitimate company in violation of the legislation.

Express consent is not always required, however. There are some exceptions including:

* On-going client support – you can continue to send communications that provide notification or factual information related to an existing client’s account.
* Inquiries – if you receive an inquiry from someone seeking information or an estimate, you are permitted to respond.
* Business cards – if someone has handed you their business card, which discloses their e-mail, you can send them communications relevant to their business role provided they have not otherwise indicated they do not wish to receive unsolicited messages.
* Family – communications may be sent to people with whom you have a personal or family relationship, which is expected to be defined in the regulations to include family and friends.

The bottom line is companies are going to have to go through their databases of contacts and in many circumstances may need to get any previous clients to expressively opt in if they want to continue marketing to these contacts, Kutlesa said. She added that it’s likely companies will lose some contacts as not everyone will take the time to give their consent or may simply decline.

Rebecca Chan, a partner with Borden Ladner Gervais LLP, is also fielding a lot of questions about the new bill and recommends companies start preparing sooner rather than later.

“We are telling our clients in the financial services industry to not wait until the legislation is in force to start thinking about how to comply with it,” she said. “Mortgage brokers, like others, will need to sort out a process for addressing prospects, existing clients and past clients.”

Chan noted that the process will likely need to be sorted out with internal or external IT providers, which is why she recommends companies get an early start.

“That can’t usually be done overnight, which is why we suggest that the review process start before the in force date.”