Bulletin — October 2008

Fees under the CSBF Program

(CSBF Regulations s.13 , Guidelines Item 6.3, Section A)

Lenders are allowed to charge a borrower the following:

1. Registration fee
   The fee payable by a lender to register the CSBF loan (2% of the loan amount) may also be financed under the loan.
2. Charge for registering security documents
   A charge for preparing and registering the security document(s) which is equal to or less than the amount the lender would typically charge under a similar conventional loan. The borrower should have the option of contracting directly for preparation and registration of the required security document.
3. Premiums for life and/or disability insurance
   If life and/or disability insurance are required as a loan condition and the borrower chooses the lender's policy to finance the insurance, the premium can be expressed as fixed payments or as a percentage of the CSBF loan. When expressed as a percentage of the loan, the premium cannot be combined with the interest rate on the loan, unless the calculation for the insurance premium is shown separately in the loan document.

   In some cases, the premium for insurance is prepaid as a lump sum for the term of the loan at the time the loan is approved. Please note the cost of such prepaid insurance is not a class of loan listed under subsection 5 of the CSBF Regulations and cannot be financed using a CSBF loan.

4. Administration fee The administration fee (annual rate 1.25%) payable by the lender may be charged to the borrower. However, this is to be included in the maximum annual interest rate of prime + 3% for a floating rate loan or the residential mortgage rate + 3% for fixed rate loan.

   A lender cannot require a borrower to pay any other fees or charges (e.g., an application, an annual review or a renewal fee) in a loan. If a lender requires such ineligible charges or fees, the loan would not comply with the CSBF Regulations. This could result in an adjustment or rejection of a claim for that loan.

Loan Registration

Where a lender finances two or more classes of assets (e.g., equipment and leasehold improvements) involving the same project and the same loan, it is only necessary to submit one loan registration form rather than a loan registration form for each class of asset. The classes of assets can be itemized in Boxes 25-29 of the registration form.

As well, where there is cost overrun, the loan amount can be increased without completing a new registration form, provided that the conditions set out in item 1.2, Section B of the Guidelines are met. Lenders must clearly detail in their correspondence the new loan amount(s) by class of loan and submit to the CSBFP the 2% registration fee that relates to the increase.

In this way, the lender's reporting, administration fee calculation and claim submission would be on one loan rather than on multiple loans.

Interim Claims and Final Claim Submission Date

Under the CSBF Regulations, an interim claim can be submitted only after all assets securing the loan have been realized (or if assets are abandoned because it is not cost effective to realize on them) and only the guarantee, suretyships or personal liability of the sole proprietor or partner remains to be realized. The lender should determine the date when the realization of the guarantee, suretyships or personal liability will have been completed.

In order to expedite the processing of the interim claim, lenders should indicate, in Box 31 of the Claim for Loss Form, the date for the final claim submission. This date may be modified by the CSBF Directorate if it is deemed to be unreasonable. If the final claim or a request for an extension is not received before the final claim submission date, the interim claim is deemed to be final.

If you have any comments related to any points raised in this Bulletin, please feel free to contact us. We encourage you to submit any topics of interest that you would like to see addressed in future Bulletins.