The New Financial Consumer Protection Framework is in Force – An Overview of the Key Aspects:
By Virginia Torrie
In December of 2018, Bill C-86 (or the Budget Implementation Act, 2018, No. 2) received royal assent. This bill introduced a new proposed framework that would put more obligations on financial institutions for the purpose of creating more transparent and equitable business practices by banks, authorized foreign banks, and federal credit unions. Appropriately, this series of proposed amendments was given the title of the Financial Consumer Protection Framework (“Framework”) and it introduced an entire new section of the Bank Act, entitled Part XII.2 – Dealings with Customers and the Public, as well as Part XVI.1 – Whistleblowing. Another effect of the amendments was to strengthen the mandate of the Financial Consumer Agency of Canada (“FCAC”) and grant additional powers to that Agency in order to effectively deal with new provisions. The Framework, along with its associated Financial Consumer Protection Framework Regulations (“Regulations”), officially came into force on June 30, 2022. This blog post outlines the key aspects.
Substance
The contents of Part XII.2 fall into three main divisions. Division 1 – Interpretation, merely provides a number of new defined terms and interpretive aids. Division 2 – Fair and Equitable Dealings outlines requirements for responsible business conduct (such as rules to ensure everyone has access to basic banking services) as well as prescribed processes for dealing with complaints from consumers. Division 3 – Disclosure and Transparency for Informed Decisions, outlines procedures that financial institutions must adhere to regarding what kind of information must be disclosed when consumers sign up for certain products such as deposit accounts, credit cards, and optional products or services, as well as the manner in which such information must be disclosed. This division also sets out information that banks must make known to the public, such as public accountability statements.
The provisions introduced in Part XVI.1 are not quite as extensive as those in Part XII.2, but they still mark a key substantive addition. As one might expect, the provisions found in this part require banks to create whistleblowing programs to encourage employees to come forward if they notice problems. Importantly, the provisions also give protections to any whistleblowing employees by prohibiting any potential retribution by financial institutions towards those employees.
To tie everything all together, the FCAC also issued three new guidelines on: whistleblowing procedures, appropriate products and services, and complaint-handling procedures. They key principles that underlie each of these guidelines are effectiveness, timeliness, and accessibility.
Form
As mentioned above, the Framework came into force alongside its own Regulations. The new provisions of the Bank Act go hand-in-hand with the provisions of the Regulations, and the two documents are meant to be read in conjunction with each other. For example, many of the new Bank Act provisions mention “prescribed” terms, such as prescribed amounts, prescribed information, etc., without explicitly stating what exactly is meant by such terms. It is then up to the practitioner to consult the provisions found within the Regulations to determine what “prescribed” means for each specific instance. For the purpose of efficiency, practitioners may want to consult commentary on the new provisions which provide cross-references between the two documents.
Another aspect of the new Regulations is its approach to making the existing legislation much more workable and comprehensive. While some of its provisions are brand-new, the Regulations also amalgamate the contents of thirteen other banking regulations (such as Cost of Borrowing and Access to Basic Banking Services Regulations). As a result, those statutes that have been fully absorbed are now repealed. A number of other banking regulations also influenced the contents of the new Framework, but have been instead simply amended rather than repealed, such as the Negative Option Billing Regulations.
Conclusion In sum, and as explained in the Government of Canada’s official news release, “[t]he Framework holds banks to a higher standard and requires them to take greater responsibility for consumer outcomes” and that it “also requires banks to meet higher standards in their sales practices”. While only time will tell how effective all of the changes will be at achieving their goals, the new Framework is a step in the right direction for building trust among consumers and business owners.
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