Running Account Credit Agreement Template for Canada

A Running Account Credit Agreement creates a revolving credit facility that allows you to access funds up to a predetermined limit, repay them, and access them again as needed. This flexible financial arrangement is governed by strict Canadian federal and provincial regulations designed to protect both lenders and borrowers while ensuring transparent credit practices.

When do you need this document?

You need this agreement when establishing any form of ongoing credit relationship in Canada. Financial institutions use these agreements for business lines of credit, allowing companies to manage cash flow by drawing funds during slow periods and repaying during profitable times. Retail businesses require these agreements when offering store credit cards or payment plans to customers. Merchant credit facilities also rely on running account agreements to provide working capital based on future sales projections. If you're a business owner seeking flexible financing options or a financial institution offering revolving credit products, this agreement provides the legal framework for ongoing credit relationships.

Key legal considerations

The agreement must clearly define all parties, including guarantors and security providers where applicable. Credit limits, interest calculation methods, and fee structures require precise documentation to comply with disclosure requirements. Default provisions must specify exactly what constitutes breach of contract and the remedies available to the credit provider. Security interests, if any, must be properly documented and registered according to provincial Personal Property Security Act requirements. The agreement should address how interest compounds, minimum payment calculations, and billing cycle procedures. Consumer protection provisions may apply depending on the nature of the borrower and the credit facility, requiring additional disclosures and cooling-off periods in certain circumstances.

Legal requirements in Canada

Federal legislation significantly impacts these agreements through the Interest Act, which mandates specific disclosure requirements for interest rate calculations and requires annual percentage rates to be clearly stated. The Bank Act governs how federally regulated financial institutions can structure credit agreements and interact with borrowers. Provincial Consumer Protection Acts add additional layers of regulation, particularly for consumer credit arrangements, including mandatory disclosure periods and cancellation rights. PIPEDA requirements apply to personal information collection and use throughout the credit relationship. Section 347 of the Criminal Code sets the maximum allowable interest rate at 60% annually, making compliance crucial to avoid criminal liability. Provincial regulations may also impose additional licensing requirements for credit providers and specific documentation standards for credit agreements.