Ontario’s Credit System
Needs Modern Rules for a Modern Economy

Abstract: As Ontario prepares its 2026 budget, the Canadian Lenders Association (CLA) is calling for targeted, practical reforms to modernize the province’s credit framework in ways that protect consumers, support innovation, and preserve competition. Over the past year, the Ontario Ministry of Finance and the CLA have worked constructively on solutions, particularly in modernizing the Repair and Storage Liens Act, demonstrating that collaborative, evidence-based regulation can deliver better consumer outcomes. Building on this momentum, the CLA’s recommendations focus on maintaining a diverse and competitive credit market, updating outdated statutes to reflect modern lending realities, enabling responsible adoption of artificial intelligence, and ensuring that anti–money laundering obligations remain proportionate to risk.

Read full submission here: http://165.22.231.253/press/ontario-2026-pre-budget-submission/

Ontario’s economy runs on credit. From first-time car buyers and growing small businesses to families managing household liquidity, access to responsible credit underpins economic participation, mobility, and resilience. Yet much of the regulatory framework governing lending in Ontario was designed for a financial system that no longer exists.

As the Province prepares its 2026 budget, policymakers have an opportunity to modernize key elements of Ontario’s credit ecosystem in ways that strengthen consumer protection, support innovation, and preserve competition. Over the past year, the Ontario Ministry of Finance and industry participants, including the Canadian Lenders Association (CLA), have engaged constructively on several of these issues, demonstrating that pragmatic reform is both possible and underway.

This is not a call for deregulation. It is a case for effective regulation that reflects how Ontarians actually access and use financial services today.

Competition in Credit Is a Feature, Not a Bug

Ontario benefits from a diverse lending market that includes banks, credit unions, fintechs, and specialty and alternative lenders. This diversity is not incidental. It is what allows borrowers to enter the credit system earlier, rebuild credit histories, and progress toward prime lending over time.

Non-bank and specialty lenders often serve as transitional providers, helping individuals and small businesses access vehicles, equipment, or working capital when traditional channels are unavailable. In doing so, they promote inclusion, mobility, and economic participation.

The risk is that overly rigid or misaligned regulation unintentionally drives these providers out of the market. When compliance costs or regulatory uncertainty disproportionately burden smaller or specialized lenders, the result is less competition, fewer choices for consumers, and greater market concentration. In the worst cases, borrowers are pushed toward informal or unregulated credit sources, undermining consumer protection altogether.

Ontario should continue to support a proportionate, technologically neutral regulatory environment that preserves lender diversity and promotes responsible access to credit across all stages of the borrower journey.

Modernizing the Repair and Storage Liens Act Through Collaboration

Ontario’s Repair and Storage Liens Act offers a clear example of how thoughtful, collaborative policy development can deliver better consumer outcomes. Over the past year, the Ontario Ministry of Finance has worked closely with the CLA and other stakeholders to examine how the Act operates in practice and where it no longer reflects the realities of modern vehicle financing and ownership.

This engagement has been constructive and solutions-oriented, with a shared focus on protecting consumers while preserving the legitimate interests of repair facilities and secured lenders. The discussions have recognized that the current framework does not clearly distinguish between essential safety-related repairs and discretionary or cosmetic services, creating uncertainty and, in some cases, unintended cost burdens for consumers.

The issue is not lien rights themselves, but the need for clearer statutory guardrails. Targeted amendments that clarify the scope of lien-eligible repairs, improve transparency around lien amounts, and strengthen notice and fairness protections would restore predictability without undermining the Act’s original intent. The progress made to date demonstrates that modernization of the RSLA is not only necessary, but achievable through continued collaboration.

Responsible AI Depends on Trust Infrastructure

Artificial intelligence is already embedded in financial services, from fraud detection and identity verification to underwriting and customer support. When used responsibly, AI can improve accuracy, reduce fraud, lower costs, and deliver better consumer outcomes.

But effective AI deployment depends on trusted digital infrastructure. Identity assurance, data provenance, authentication, interoperability, and governance are foundational. Without them, AI systems introduce compliance risk, slow innovation, and deter investment.

Ontario has an opportunity to lead by focusing on principles-based governance rather than prescriptive rules that will quickly become obsolete. Regulatory frameworks should emphasize transparency, accountability, privacy, explainability, and auditability, while aligning with federal and international standards.

AML Rules Must Remain Proportionate to Risk

Strong anti–money laundering controls are essential. The CLA fully supports them. But recent developments around beneficial ownership requirements risk overshooting their intended purpose in certain low-risk contexts.

Equipment finance and other specialty lenders have raised concerns about applying full beneficial ownership requirements to small-ticket, asset-secured, high-volume transactions. In many cases, ownership information is not readily available at the point of sale, and the transactions themselves carry limited financial crime risk.

A risk-based approach would calibrate expectations based on transaction size, asset security, customer profile, and fraud indicators. This would allow enforcement efforts to focus where risk is highest, while preserving access to compliant, regulated credit for small businesses across Ontario.

Effective Regulation, Not More Regulation

Ontario’s financial services sector is evolving rapidly. Regulation must evolve with it. The choice is not between consumer protection and innovation. Done properly, the two reinforce each other.

The collaborative work between the Ontario Ministry of Finance and industry on the RSLA shows what effective regulation looks like in practice: evidence-based, engaged, and focused on real-world outcomes for consumers. Building on this approach across other areas of financial services policy would strengthen Ontario’s competitiveness and resilience.

As the 2026 budget approaches, Ontario has an opportunity to continue modernizing its credit framework in ways that protect consumers, support innovation, and ensure a diverse, competitive financial ecosystem. Getting this balance right matters, not just for lenders, but for households and businesses across the province.

Four Key Points

1. A competitive credit market supports consumer mobility
   Ontario benefits from a diverse mix of banks, credit unions, fintechs, and specialty lenders that help borrowers enter the credit system, rebuild financial standing, and progress toward prime credit. Preserving this diversity promotes choice, inclusion, and economic resilience.

2. RSLA modernization is already underway and consumer-focused
   The Ontario Ministry of Finance and the CLA have been highly engaged over the past year in reviewing and modernizing the Repair and Storage Liens Act. Targeted amendments can clarify lien-eligible repairs, improve transparency, and reduce disputes, strengthening protections for consumers while restoring predictability for lenders and repairers.

3. Responsible AI requires trusted digital infrastructure
   Artificial intelligence can improve underwriting accuracy, fraud detection, and customer outcomes, but only when supported by strong identity assurance, data integrity, and governance frameworks. Ontario should adopt principles-based, interoperable approaches that enable innovation while maintaining public trust.

4. AML and beneficial ownership rules must remain risk-based
   Strong AML controls are essential, but applying uniform beneficial ownership requirements to low-risk, small-ticket, asset-secured transactions risks unintended consequences. A proportionate, risk-based approach ensures enforcement resources are focused where risk is highest without restricting access to compliant credit for small businesses and consumers.

Sign up for the CLA Finance Summit Series