Executive Summary: Key Legal and Evidentiary Issues

• PRA Group Canada Inc., as assignee of a high-cost loan originally granted by Fairstone Financière inc., sued the defendant for an unpaid balance of $12,608.38.
• Uncontradicted evidence showed that Fairstone failed to assess the defendant's capacity to repay the credit before contracting, contrary to article 103.2 of the Consumer Protection Act.
• Under article 103.3 of the Act, this omission results in the loss of the right to credit charges and an obligation to refund charges already paid.
• Pursuant to article 1643 of the Civil Code of Québec, the defendant could raise against the assignee (PRA Group) any defence she could have raised against the assignor (Fairstone).
• Fairstone's additional failure to assist the defendant and apply her job-loss insurance after being notified of her job loss was found to amount to exploitation under article 8 of the Act.
• Applying articles 8 and 272(c), the Court reduced the defendant's obligation to zero and dismissed both the principal claim and the counterclaim.

Facts of the case

On October 20, 2020, the defendant entered into a high-cost loan contract with Fairstone Financière inc. The loan consisted of net capital of $11,033.63, interest of $10,380.95, disability and job-loss insurance costing $4,587.39 with interest of $4,316.03, a credit rate of 29.99%, a five-year term, and an optional "Habitation et Auto" plan at a cost of $1,033.63. The loan amount was disbursed the same day. According to the defendant's uncontradicted evidence, Fairstone did not evaluate her capacity to repay the credit before concluding the contract. Over the term, she repaid $7,768.30. On August 12, 2021, she lost her job and notified Fairstone by telephone, but Fairstone did nothing to trigger the insurance protection she had purchased. She made a final payment on August 18, 2022, after which she stopped making the periodic payments provided for in the contract. On April 27, 2023, Fairstone sold, ceded, and transferred all its rights, title, and interest under the loan to PRA Group Canada Inc. and notified the defendant by letter, which indicated a balance of $12,608.38. PRA Group sent a demand letter on July 17, 2023 claiming that amount, filed its claim in court on November 8, 2023, and on April 12, 2024 the defendant contested the claim, alleging Fairstone's failure to assess her ability to pay, and filed a counterclaim for $4,000.

Statutory provisions and contractual issues

Although the contract appeared legally compliant on its face, the case turned on provisions of the Consumer Protection Act (RLRQ, c. P-40.1), a law of public order. Article 103.2 requires a merchant, before concluding a credit contract, to evaluate the consumer's capacity to repay the credit requested. Article 103.3 provides that a merchant who fails to make this evaluation loses the right to credit charges and must refund any credit charges the consumer has already paid. Articles 103.4 and 103.5 impose additional requirements for high-cost credit contracts, including providing the consumer with documents showing the evaluation and debt-ratio information, and create a presumption that a consumer whose debt ratio exceeds the regulatory threshold has contracted an excessive, abusive, or exorbitant obligation. Article 8 allows a consumer to seek nullity of the contract or a reduction of the resulting obligations where the disproportion between the parties' respective obligations is so considerable that it amounts to exploitation of the consumer, or where the consumer's obligation is excessive, abusive, or exorbitant.

The court's reasoning and analysis

The Court, per Judge Eliana Marengo, found that by failing to evaluate the defendant's capacity to repay before the contract was concluded, Fairstone did not comply with the Act, which at minimum meant the loss of the right to credit charges and the obligation to refund charges already paid. Under article 1643 of the Civil Code of Québec, the defendant could set up against PRA Group any payment made to Fairstone before the assignment became opposable to her, as well as any other cause of extinction of the obligation arising before that time; the assigned debtor may raise against the assignee the defences she could have raised against the assignor, and the assignee has no more rights than the assignor. Of the $7,768.30 repaid, $1,689.60 had been applied to capital and $6,079.24 to interest. Given the loss of the right to interest, the Court offset the $6,079.24 against the net capital of $11,033.63, leaving a balance of $3,265.33. The Court went further, however, holding that Fairstone's omission was serious and amounted to exploitation under article 8. Combined with the additional grave omission of failing to assist the defendant, inform her of the terms of the job-loss insurance, and apply the insurance once notified of her job loss, the defendant's obligation was excessive, abusive, and exorbitant and had to be reduced to zero under articles 8 and 272(c) of the Act, such that she owed nothing further to PRA Group. In light of this outcome, the counterclaim had become without purpose.

Ruling and outcome

In its judgment dated May 12, 2026, the Court dismissed PRA Group's principal claim, with legal costs, and also dismissed the defendant's $4,000 counterclaim. The successful party was the defendant, Jean Baptiste Lisebeth, whose obligation under the loan was reduced to zero and against whom nothing was awarded; no monetary amount was granted in her favour beyond legal costs, the exact amount of which is not specified in the judgment.