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Personal Property Security Act (PPSA)-Exempt Collateral



The following information is prepared for information purposes only. It is not intended to express a legal opinion. In all cases where you require a legal opinion, it is recommended that you contact a lawyer. Should you have any questions or comments relating to this material, please contact Peter Balsdon at your convenience.

A pay day loan company also advances loans against the security of vehicles providing that the vehicle is six (6) years or newer and lien free. Should there be default on the repayment of the loan, the lender is entitled to seize and sell the vehicle.

But, in accordance with the provisions of the PPSA s.62(2) and the Execution Act s.3(2), a loan advanced against a vehicle which is not loaned for the purpose of the purchase of the vehicle thereby creating a purchase money security interest (PMSI), is classified as “exempt collateral”.

The Execution Act, S.3(2) provides that when a vehicle is subject to seizure and sale and if an exemption is claimed for the motor vehicle that has a sale value in excess of the sum of the amount prescribed and the costs of the sale, the first $6,600.00 of the sale proceeds is to be paid to the debtor before the creditor (the lender) realizes any proceeds pursuant to Ontario Regulation 657/05 under the Execution Act.