Can I run a credit check on someone who wants to buy my business?

A seller who is about to share financial records may want to know the buyer can follow through, and a credit report may seem a quick check. In Ontario and British Columbia, whether you may get one is restricted by that province’s credit-reporting statute. This page covers Ontario and British Columbia only, each on its own statute. In any other province, check your province’s rules with a lawyer. For the consent itself, see credit check consent.

Why a statute applies

The Financial Consumer Agency of Canada describes a credit report as a summary of how you have used credit in the past, and says credit bureaus follow rules about who can see it. Its list of those who may request one does not name buyers of a business, so do not assume you qualify.

Ontario

Under the Consumer Reporting Act, section 8(2) says no person shall knowingly obtain information from a consumer reporting agency’s files about a consumer except for the purposes in section 8(1), subject to section 8(3) on identifying information given to governments and police. Those include the consumer’s written instructions, and a report to a person the agency has reason to believe otherwise has a direct business need for the information in connection with a business or credit transaction involving the consumer. A consumer is a natural person but not one engaging in a transaction, other than relating to employment, in the course of carrying on a business, trade or profession. Whether a given buyer is a consumer is a question for your lawyer. Section 10(2) also bars requesting or obtaining a consumer report that contains personal information about a consumer (in this Act, information other than credit information about, for example, character, reputation or mode of living), or one requested on the basis that the person is considering extending credit to a consumer who has not, at the time of the request, applied for credit, unless the person first gives written notice of the fact to the consumer and, if the consumer asks, tells the consumer the name and address of the agency supplying the report.

British Columbia

Under section 107(1) of the Business Practices and Consumer Protection Act, a person must not obtain a report about an individual from a reporting agency for a purpose in section 108(1)(a) without the individual’s consent. Section 108(1) lists the only circumstances in which a reporting agency may knowingly give credit information in a report, including to a person it has reason to believe otherwise has a direct business requirement for the report in connection with a transaction, and under the written consent of the individual. Section 108(2) bars obtaining a report except in those circumstances. Consent may be obtained by any method that lets the person produce evidence it was given (s.107(2)).

If you act on what the report says

Both statutes add notice duties when a report is used to deny a benefit or raise a charge. Ontario’s section 10(7) requires the user of the information to deliver notice to the consumer when the action is communicated, where a benefit is denied or a charge increased wholly or partly because of information from a consumer reporting agency or another person. British Columbia’s section 110 requires written notice of the denial or increase in person or by mail, not later than 30 days after the decision, where a person who received a report given under section 108(1)(a) uses information in it to deny all or part of a benefit or increase its cost. Ask a lawyer whether declining a buyer engages either rule.