Appearance before the Standing Committee on Finance (July 7, 2020): Media lines

Issue: Amendments to the FCAC Act, and new powers for FCAC’s Commissioner have come into force on April 30, 2020.

Key messages

• Protecting consumers of financial products and services is a priority for the Government of Canada.
• The Financial Consumer Agency of Canada’s role is to protect financial consumers by strengthening the financial literacy of Canadians and ensuring that regulated entities comply with their legislative obligations, codes of conduct and public commitments.
• The Financial Consumer Agency of Canada welcomes these legislative amendments that strengthen the Agency ability to protect financial consumers. This includes giving new powers to FCAC’s Commissioner, such as the power to direct a bank to follow a compliance order.
• The provisions that have come into force are:
  • mandatory naming of the entity that has committed a violation
  • the Commissioner’s power to direct a bank to comply with a compliance agreement or a consumer provision
  • the Commissioner’s power to direct that a bank be subjected to a special audit by a third party
  • higher penalties that may go up to $10,000,000 per violation
• FCAC’s new powers and tools better enable the Agency to fulfill its mandate and align the Agency with other regulators in Canada and abroad.
• The legislative amendments that have come into force on April 30, 2020 are the first part of a strengthened Financial Consumer Protection Framework to better protect financial consumers. Other amendments will come into force at a later date.
• In the context of COVID-19, these new powers and tools will enhance FCAC’s ability to protect financial consumers and may be used as appropriate when a regulated entity is not in compliance with its legislative obligations, codes of conduct or public commitments.

Questions and answers

1. What is the Financial Consumer Protection Framework (FCPF)?

Protecting consumers of financial products and services is a priority for the Government of Canada.

In December 2018, the government approved legislative amendments as part of a strengthened Financial Consumer Protection Framework to better protect financial consumers.

The Financial Consumer Protection Framework strengthens consumers' rights and interests when dealing with their banks, and improves the Financial Consumer Agency of Canada's ability to protect consumers. Amendments are focused on three key areas: requiring new internal bank practices to further strengthen outcomes for consumers, providing the Financial Consumer Agency of Canada with additional tools to implement supervisory best practices, and further empowering consumers.

These legislative amendments strengthen the Financial Consumer Agency of Canada’s ability to protect financial consumers with the addition of new powers and tools that better enable the Agency to fulfill its mandate.

2. How do these amendments improve FCAC’s ability to protect consumers?

These legislative amendments strengthen the Financial Consumer Agency of Canada’s ability to protect financial consumers with the addition of new powers and tools that better enable the Agency to fulfill its mandate. For example, this includes giving new powers to FCAC’s Commissioner, such as the power to direct a bank to follow a compliance order.

These changes reflect supervisory best practices and align the Agency with other regulators in Canada and abroad.

3. Will these amendments help consumers in the context of COVID-19

In the context of COVID-19, these new powers and tools will enhance FCAC’s ability to protect financial consumers and may be used as appropriate when a regulated entity is not in compliance with its legislative obligations, codes of conduct or public commitments.

4. What new authorities does FCAC have now?

Administrative Monetary Penalties (AMPs): The Commissioner may now issue a maximum monetary penalty of $10 million per violation for regulated entities, and $1 million per violation for an individual person.

Mandatory Naming: When a regulated entity has committed a violation of a legislative obligation, the Commissioner must now make public the nature of a violation, the name of the person or entity who committed it, and the amount of the penalty imposed.

Commissioner’s Direction: The Commissioner has the power to direct banks to comply with consumer provisions, including requiring a bank to take action where there are concerns that a breach is ongoing or will take place.

Special Audits: The Commissioner has the authority to direct banks to commission third-party (independent) audits to monitor compliance of a particular requirement.

5. How will these changes impact FCAC’s supervisory approach?

The Agency will update its Supervision Framework to reflect the amendments that have come into force on April 30, 2020.

FCAC’s Supervision Framework describes the principles and processes applied by FCAC to supervise federally regulated entities and ensure that financial consumers benefit from the applicable protections.

6. When will the higher penalties and mandatory naming apply?

The provisions on higher penalties and mandatory naming will apply to entities that have committed a violation on, or after, April 30, 2020. Regulated entities that have committed a violation prior to April 30, 2020, but are still non-compliant when the legislative amendments have come into force, will also be subject to the provisions on higher penalties and mandatory naming.

Regulated entities that have committed a violation but complied with the requirements before April 30, 2020, will be subject to the provisions on penalties and naming as they were prior to the legislative amendments coming into force.

7. What will it take to receive the maximum penalty?

The action(s) FCAC may take as a result of a bank violating a consumer protection provision depends on a number of factors.

FCAC will update its Supervision Framework to reflect new additional criteria for determining the administrative monetary penalties.

FCAC’s Supervision Framework explains the activities and tools that FCAC leverages to fulfill its supervisory mandate.

8. Why didn’t all the provisions come into force at once? When will the other provisions come into force?

Supporting regulations as well as system and procedural changes are required prior to implementation of the modernized consumer protection measures.

The Department of Finance has been consulting with stakeholders on the development of supporting regulations and related implementation and timing considerations.

FCAC is also working to develop guidance (where appropriate) for Federally Regulated Financial Entities, internal policies and procedures, update its Supervision Framework and update internal systems to be prepared for implementation. FCAC is also engaging with Industry about the implementation process.

9. Bill-C-86 gave FCAC more powers. Has it used any of these enforcement tools, yet?

The action(s) FCAC may take as a result of a bank violating a consumer protection provision depends on a number of factors.

FCAC’s Supervision Framework explains the activities and tools that the Agency utilizes to fulfill its supervisory mandate.

FCAC’s Supervision Framework describes the principles and processes applied by FCAC to supervise federally regulated entities and ensure that financial consumers benefit from the applicable protections.

10. If pressed… Can you explain the delays in publishing the updated Supervision Framework? When can we expect it to be published?

In response to COVID-19, FCAC needed to reassign and re-prioritize its internal resources to protect consumers on key consumer protection issues that are aligned with the current environment and help them manage their finances during this difficult time. For example, FCAC is treating the relief measures announced by the banks as public commitments and is currently monitoring their implementation.

FCAC is currently engaging the industry prior to finalizing the Supervision Framework prior to publishing.

However, FCAC regularly consults with stakeholders on compliance-related initiatives that are likely to have a regulatory impact or cause administrative changes that are likely to have a significant impact. The purpose of FCAC’s consultation process is to give stakeholders an opportunity to express their views on matters that concern them.