Appearance before the Standing Committee on Finance (July 7, 2020): Banks’ relief measures during COVID-19

Issue

Federally regulated financial institutions have been working with consumers who have requested financial relief assistance to find ways to help them through the impacts of COVID-19 since the end of March. Some of these measures have included offering payment deferrals of up to 6 months on mortgages, HELOCs, lines of credit, loans, auto finance loans and credit card payments. Additional measures also include offering credit card interest rate reductions, fee reversals and interest forgiveness. Banks have also provided seniors and frontline workers with designated branch hours.

Background

In general, consumer requests are being approved provided their account is in good standing and they self-declare that they have been negatively impacted by the COVID-19 crisis. No supporting proof of hardship is required for approval. A small number of requests are declined as they do not meet the bank’s criteria for approval; however, some consumers are offered alternative financial relief which include interest only payments, extending amortization periods, interest rate relief, change of payment amounts or credit restructuring. 

Data/Quick facts

• Initially, banks faced public criticism related to credit card interest rates. Most large banks are now offering interest rate reductions for most credit card deferral requests, by as much as 50 per cent. 
• Small and medium sized banks’ (SMSBs) credit card deferral requests exceed that of mortgages. SMSB consumers most frequently request mortgage and credit card deferrals compared to all other product lines.

Key messages

• Banks and other regulated entities have demonstrated leadership and commitment to working with consumers who have requested financial relief assistance.  
• They have implemented financial relief measures in a timely manner, including payment deferrals of up to 6 months on mortgages, HELOCs, lines of credit, loans, auto finance loans and credit card payments.
• FCAC has communicated its expectation to banks that the relief measures they provide to consumers are implemented in a fair and appropriate manner.