New muscle for Canada’s Financial Consumer Protection Framework

On December 13, 2018, the House of Commons passed Bill C-86, introducing sweeping new changes to Canada’s Financial Consumer Protection Framework that add new muscle to this critical legislation. This includes a number of important new consumer protection measures called for by Prosper Canada and the ABLE Network in briefs submitted to  federal consultations in 2014, 2016 and 2017.
 
While the government did not adopt the “best interest” standard we had hoped for, banks are now required to put in place policies and procedures to ensure all products and services offered or sold are appropriate to each customer’s circumstances, including financial needs.
 
To make it easier and simpler for vulnerable consumers to compare products and what they are paying for them, we advocated for standardized “information boxes” on all statements and marketing materials for all products and services, not just credit cards. These will now be required for all banking products and services.
 
To help consumers with low incomes avoid unanticipated fees and penalties, we recommended that the Canadian Bankers Association update its voluntary 2014 Low-cost Account Guidelines to add standards preventing these. Instead, banks can no longer charge any fee or penalty unless they disclose it beforehand in a product or service agreement to which the customer has expressly consented. Further, banks must now send electronic alerts to consumers when they are at risk of incurring fees and explain what they can do to avoid them.
 
Because ‘what gets inspected, gets respected,’ we recommended that bank public accountability statements, published annually, report on the measures banks are taking to provide products and services  to people with low incomes, as well as people facing accessibility, linguistic or literacy barriers. This is now the law and banks must report on measures taken to provide products and services to people with low incomes, seniors, people with disabilities and people with accessibility, linguistic or literacy barriers.
 
In the same spirit, we recommended that the Financial Consumer Agency of Canada (FCAC) publish annual data on the number and type of financial consumer complaints received and their resolution.  Under the new legislation, FCAC’s annual report must now include specified information about complaints from financial institutions and their external complaints bodies. This includes the number, nature and resolution of the complaints, including the number resolved to the customer’s satisfaction.  
 
In addition to these successes, FCAC’s newly updated purpose formally includes “strengthening the financial literacy of Canadians.” The new legislation also expanded FCAC penalties and enforcement powers, increasing maximum penalties from $500,000 to $10 million per violation for companies and from $100,000 to $1 million for individuals. FCAC is now required to disclose publicly all penalties, the nature of the violation and the financial entity concerned.
 
FCAC may also direct institutions and individuals to take specific actions to comply with the law and apply to the courts for an order to enforce their compliance.
 
To foster compliance with these and other new rules, banks must now designate a specific committee of their board to oversee compliance and the majority of committee members must not be employees or officers of the institution. The committee shall require management to establish procedures to comply with the law, review the appropriateness of these procedures, and report to FCAC on the performance of its duties.
 
In all, Bill C-86 introduced over 50 new measures to protect financial consumers in Canada. In addition to the topics already mentioned, these address:

• Fair and equitable dealing
• Access to banking services
• Credit
• Optional products and services
• Complaints processes
• Whistleblowing
• Disclosure and transparency rules.

Some of these changes will go into effect immediately. Others will unfold over the next two years, as new regulations are developed and as FCAC publishes relevant guidance for financial institutions.

All financial institutions will have to make significant and challenging changes to their governance, policies, procedures, training programs and technology systems, as they grapple with this new, higher standard for fairness and transparency with consumers, and what it means to actively include vulnerable groups in the design and delivery of their products and services.

We believe banks want to do their best for their customers and to serve all Canadians in a fair and equitable manner. We look forward to working with them to ensure everyone is financially included and has access to the products and advice they need on their road to financial health.