Appearance before the Standing Committee on Finance (July 7, 2020): Additional Q&As

From: Financial Consumer Agency of Canada

Q&A’s related to FCAC’s response to COVID-19

1. How is FCAC monitoring the relief measures and commitments introduced by the banks?

2. How do you know banks are upholding their public commitments regarding relief measures?

FCAC is monitoring the public commitments that banks and other financial institutions are making, such as waiving fees and providing flexibility on certain payments, to accommodate the financial hardships of consumers.

FCAC has been receiving weekly statistics on the financial relief measures offered by the big six banks and small- and medium-sized banks. These include payment deferral programs for mortgages and other credit products such as loans, lines of credit, credit cards and auto finance loans.

Based on the information FCAC has gathered, banks have approved the majority of consumer requests for relief measures, and those who have been declined have been offered alternative financial relief.

FCAC has communicated its expectations to regulated entities that they implement the measures in a fair and appropriate manner and ensure that consumers continue to have access to financial services at a reasonable cost and with the safety and security they have come to expect.

3. Are there consequences for banks who do not uphold their public commitments on relief measures?

FCAC is treating the relief measures that banks and other financial institutions are offering, such as waiving fees and providing flexibility on certain payments, to accommodate the financial hardships of consumers as public commitments.

FCAC is committed to protecting financial consumers and monitoring industry compliance with the public commitments. In the event of a possible breach of a code of conduct and public commitment, the action(s) FCAC may take depend on a number of factors.

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

Compliance of financial institutions with a code of conduct and public commitments demonstrates to FCAC that the financial sector is willing and able to manage its activities in the best interest of consumers.

If pressed on naming or issuing AMPs for non-compliance with a Code of conduct…

Naming and penalties only apply to violations, which are a contravention of a consumer provision or a compliance agreement under legislation. They do not apply to non-compliance with codes of conduct or public commitments.

However, FCAC has a variety of tools at its disposal to make sure banks comply with their obligations and that consumers are protected.

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

4. How many complaints has FCAC investigated related to relief measures since the beginning of COVID-19? Has FCAC issued any penalties or notices of violations since the beginning of COVID-19?

FCAC records consumer complaints to determine whether there is a possible breach of a legislative obligation, code of conduct and public commitment. Complaints help FCAC to identify trends and issues of concerns and to determine whether an investigation is warranted.

In addition, as part of FCAC’s monitoring process, the Agency regularly receives information from banks on the complaints they receive from consumers. FCAC will also assess the bank’s response to issues that have impacted consumers due to the pandemic by collecting and analyzing data from complaints related to COVID-19.

In the event of a possible breach of a legislative obligation, code of conduct and public commitment, the action(s) FCAC may take depend on a number of factors. FCAC’s Supervision Framework explains the activities and tools that the Agency utilizes to fulfill its supervisory mandate.

FCAC Decisions provide information about Notices of Violation and Notices of Decision (for breaches of legislation/regulation) or Notices of Non-Compliance (for breaches of codes of conduct or public commitments). These decisions are published on Canada.ca.

FCAC also reports to Parliament, through its Annual Report, on the types of complaints it receives and the performance of regulated entities in meeting their legal obligations.

5. How is FCAC handling complaints from consumers on COVID-19 relief measures.

In Canada, the resolution system for bank complaints uses a combination of internal bank complaint handling procedures (CHPs) and external complaint bodies (ECBs).

Consumers who are not satisfied with the bank’s decision on granting them relief should file a complaint with their bank.

Banks must have a complaint handling procedure in place. Banks must also provide consumers with information on its complaint handling procedures when they open an account or when they want to make a complaint to their bank. The Financial Consumer Agency of Canada also offers information for consumers to guide them through the complaint process.

Consumers also have the right to bring disputes to their bank’s ECB when the bank is not able to resolve the complaint to their satisfaction in a timely manner.

Consumers who feel they are not getting the assistance they need, can also file a complaint with the Financial Consumer Agency of Canada.

Upon receipt of consumer complaints, FCAC records the complaint and determines whether there is a breach of a law, code of conduct or public commitment. FCAC does not provide personal redress or get involved in individual disputes. However, complaints help FCAC to identify trends and issues of concerns and to determine whether an investigation is warranted.

6. Can you explain why it has been so long since FCAC issued a Commissioner’s Decision?

FCAC last published a decision on June 4, 2019. For more information on FCAC Decisions, please refer to https://www.canada.ca/en/financial-consumer-agency/services/industry/commissioner-decisions.html

Since her appointment, the Commissioner has taken time to gain an in-depth understanding of FCAC’s supervisory role and responsibilities and the Agency’s Supervision Framework, and to review the existing supervisory files.

In the early days of her mandate, the Commissioner’s main focus was conducting industry reviews on bank complaint-handling procedures and the operations of external complaints bodies, as identified in the 2018 Fall Economic Statement. The industry reviews were published on Canada.ca in February 2020.

In addition, the Commissioner reviewed the FCAC adjudicative process and published Guidelines for Adjudicative Process in February 2020 to enhance transparency and reflect best practice.

7. What role does financial literacy play during and after the pandemic?

Strengthening the financial literacy of Canadians is a key pillar of FCAC’s consumer protection mandate. The Agency’s goal is to help Canadians develop the knowledge, skills and confidence to make informed financial decisions.

The benefit of financial literacy is recognized world-wide. Increasingly, the onus is being placed on consumers to make their own financial decisions and to manage their own financial futures. This is a big responsibility as the financial marketplace grows ever more complex with new players, complicated products and digital technologies.

We cannot expect consumers to be experts at everything. They need enough knowledge and education to ask the right questions, and to recognize when they need to ask for help.

We know that informed consumers are better-protected consumers. With a better understanding of the financial products and services they are being offered, consumers are more confident and can make better decisions.

Importance of Financial literacy in the context of COVID-19…

Financial literacy is even more important as Canadians face a period of economic uncertainty and recovery as a result of COVID-19. During the pandemic, it is important that consumers have access to unbiased and fact-based educational information and tools.

Relief measures are an important part of the government response to COVID19. Before making use of any of these relief measures, it is important that consumers understand the impact they could have on their financial situation.

Consumers should only use temporary relief measures if they need immediate help and have depleted their emergency savings. For example, by taking a mortgage deferral, a consumer may end up paying more over the life of their mortgage. This will be the case if interest continues to accrue during the deferral period and is added to their payments when they resume. Consumers should only use temporary relief measures if they need immediate help and have depleted their emergency savings.

FCAC provides unbiased and fact-based educational information and tools on debt, credit cards, mortgages, loans, lines of credit, credit reports and more to help consumers make informed financial decisions. Consumers can consult our wide range of resources on canada.ca/money, which includes a new resource with advice on managing your finances during this challenging time.

8. The crisis is not over yet. How will you continue to support Canadians as the economy begins to recover?

COVID-19 has underlined the growing recognition that consumer protection is an important element in the overall scheme of protections within our financial system.

FCAC will continue its important work to protect financial consumers by enhancing the financial literacy of Canadians and ensuring that regulated entities comply with their legislative obligations, codes of conduct and public commitments.

FCAC is keeping a close eye on consumer trends and their impact on household finances. To that end, the Agency is planning to survey Canadians to assess how they have been managing their finances during the COVID-19 pandemic, including their use of loan deferrals and borrowing tools such as home equity lines of credit.

These findings will help guide the Agency’s proactive supervision of financial institutions and will also enable the Agency to refine and update our unbiased and fact-based educational information and tools to help consumers make informed financial decisions when managing their debts and borrowing.

The Government’s response to COVID-19

9. Are you satisfied you with the government’s response to COVID-19 to protect financial consumers and make sure they are protected?

The government response has helped support Canadians facing financial hardship during this exceptional period.

From the outset of the pandemic, we have been working closely with our stakeholders, regulatory counterparts, and government partners.

In particular, there has been high levels of coordination between members of the Financial Institutions Supervisory Committee, which include the Department of Finance, the Bank of Canada, the Canada Deposit Insurance Corporation, and the Office of the Superintendent of Financial Institutions. We are sharing information and ideas to better understand how Canadians and communities have been impacted, learn about best practices, and collaborate on solutions.

The Financial Consumer Agency of Canada’s mandate and role is to protect financial consumers by enhancing the financial literacy of Canadians and ensuring that regulated entities comply with their legislative obligations, codes of conduct and public commitments.

For our part, FCAC is:

Supporting consumers by providing unbiased, fact-based information to help them make informed financial decisions.
Regularly communicating its expectation to regulated entities to ensure relief measures are implemented in a fair and appropriate manner and ensure that consumers continue to have access to financial services at a reasonable cost and with the safety and security they have come to expect.
Monitoring the implementation of relief measures announced by regulated entities as public commitments.
Undertaking research to better understand trends and issues Canadians have faced when managing their finances during the COVID-19 pandemic

10. Should the government have implemented legislative requirements to ensure banks provide relief measures to consumers?

Codes of conduct and public commitments are an important tool as they allow us to respond to issues in a more timely and flexible manner.

Compliance with a code of conduct and public commitments demonstrates to FCAC that the financial sector is willing and able to manage its activities in the best interest of consumers.

FCAC is treating the relief measures announced by regulated entities as public commitments and is monitoring their implementation.

Based on the information FCAC has gathered, banks have approved the majority of consumer requests for relief measures, and those who have been declined have been offered alternative financial relief.

Consumers who feel they are not getting the assistance they need, can file a complaint with the Financial Consumer Agency of Canada. FCAC records the complaint and determines whether there is a breach of a law, code of conduct or public commitment. FCAC does not provide personal redress or get involved in individual disputes.

Banks’ response to COVID-19

Q&A’s on the bank’s response to COVID-19 and relief measures

11. I’ve heard from some constituents/small business owners who say they contacted their bank for relief and were denied. What rights do they have when negotiating with their banks? What recourse do they have if they were denied relief?

Consumers who are facing financial hardships should contact their bank or financial service provider to discuss their particular situation and determine all the options available to them.

See question 5.

12. What tools does FCAC have to force banks to comply with their public commitments?

FCAC is committed to protecting financial consumers by actively monitoring and overseeing federally regulated financial entities to ensure they comply their commitments to consumers.

FCAC is treating the relief measures announced by the banks as public commitments.

FCAC is monitoring the public commitments and has communicated to regulated entities its expectations that they implement relief measures in a fair and appropriate manner and ensure that consumers continue to have access to financial services at a reasonable cost and with the safety and security they have come to expect.

In their response to COVID-19, regulated entities have shown a willingness to work with impacted consumers who have requested financial relief. They have also been providing flexibility on certain payments in a timely manner.

Based on the information FCAC has gathered, banks have approved the majority of consumer requests for relief measures, and those who have been declined have been offered alternative financial relief.

The action(s) FCAC may take depend on a number of factors. FCAC’s Supervision Framework explains the activities and tools that the Agency utilizes to fulfill its supervisory mandate.

13. How has FCAC's experience been working with financial institutions? Can you comment on any challenges that the FCAC has experienced? How have these challenges been managed?

Throughout the pandemic, we have been in regular contact with banks and other regulated financial entities, and are working together to protect the health and well-being of employees, consumers and our communities.

We have communicated our expectations to them that the relief measures they provide to consumers are implemented in a fair and appropriate manner, and that consumers continue to have access to financial services at a reasonable cost and with the safety and security they have come to expect.

Looking at our supervisory and regulatory work, we have adjusted our priorities so that regulated entities can re-assign internal resources to provide financial relief to Canadians impacted by the economic consequences of COVID‑19.

14. In your opinion, are the banks working in the interest of consumers during the COVID-19 crisis? Could they do more?

FCAC will continue to monitor emerging trends an issues that may negatively impact consumers and communicate its expectations to regulated entities in the interest of consumers.

15. What are you views on banks charging penalties, interest on interest, compound fees, etc. when applying for relief measures?

FCAC is aware of the concerns surrounding some banks charging interest on interest for COVID-19 mortgage deferral relief measures.

FCAC’s role is to monitor bank’s compliance with their public commitments on relief measures and ensure they meet their disclosure obligations by presenting information in a manner that is clear, simple and not misleading and by providing the borrower with a record of the changes to the credit agreement, in writing, within 30 days of the changes taking effect.

FCAC has information on mortgage deferrals on the COVID-19 consumer education page: Managing Financial Health During Challenging Times.

FCAC is developing further information on mortgage deferrals to assist consumers in understanding their financial options once the deferral period winds down.

16. Credit unions like Vancity have waived service fees and reduced credit card interest rates to 0%, and Canadians have been asking the banks to follow suit. What tools does the FCAC have to force banks to comply?

FCAC does not oversee terms and conditions of financial products or payment deferrals.

However, FCAC did communicate to regulated entities its expectations that they implement relief measures in a fair and appropriate manner and ensure that consumers continue to have access to financial services at a reasonable cost and with the safety and security they have come to expect.

Based on the information FCAC has gathered, banks have approved the majority of consumer requests for relief measures, and those who have been declined have been offered alternative financial relief.

Consumers facing financial hardships should contact their bank or financial service provider to discuss all the options available for their particular situation.

17. Due to the public health risks of COVID-19, many small businesses are only accepting payments by debit or credit card right now. Does the FCAC oversee this issue?

Merchants have the right to choose the methods of payment they will accept.

FCAC recognizes that these measures are being taken with the safety and well-being of both staff and consumers in mind.

FCAC agrees with the Bank of Canada’s statement indicating that they strongly advocate that merchants continue to accept cash to ensure Canadians have access to the goods and services they need.

Refusing cash purchases outright will put an undue burden on consumers who depend on cash and have limited payment options.

18. What rights do consumers have in terms of chargebacks?

A chargeback occurs when a consumer requests that their credit card issuer reverse a transaction they made on their credit card as a result of a disputed transaction.

Each payment card network (e.g. Visa, Mastercard, Amex) has guidelines on chargebacks. There may also be other regulations that apply, such as provincial regulations and laws.

FCAC’s role is to ensure that regulated entities comply with their legislative obligations, codes of conduct and public commitments.

FCAC oversees the Code of Conduct for the Credit and Debit Card Industry in Canada. This Code applies to the payment card networks and focuses on their dealings with merchants.

The purpose of the Code is to demonstrate the industry’s commitment to:

Ensuring that merchants are fully aware of the costs associated with accepting credit and debit card payments, thereby allowing merchants to reasonably forecast their monthly costs related to accepting such payments.
Providing merchants with increased pricing flexibility to encourage consumers to choose the lowest-cost payment option.
Allowing merchants to freely choose which payment options they will accept.

As it relates to chargebacks, the Code requires that the fees that are charged to merchants as a result of chargebacks actioned by a card-issuing bank are disclosed to merchants.

19. I am hearing from constituents that their local bank branch will be closing permanently. What can you do to stop that?

The decision to keep a bank branch open or to proceed with the closure lies solely with the financial institution. FCAC cannot overrule such business decisions.

FCAC's role is to ensure that:

The affected community has received the required notice. Banks must provide at least four months' notice of the branch closure to its customers to minimize inconvenience and to provide the time needed to find other service options.
Adequate consultation between the bank and affected community has taken place.

FCAC understand that a branch closure may affect those who rely on in-person services. Affected consumers should be aware of alternatives that include switching branches, phone and online banking or mobile banking, greater use of ATMs, and moving their financial affairs to a different bank.

FCAC provides consumers with information on what they should know and do when faced with a branch closure.

If a consumer chooses to change banks, FCAC provides useful information and an Account Selector Tool on Canada.ca to help consumers choose a suitable bank account.

20. There have been reports of consumers’ credit scores being affected by the banks’ payment deferrals. What should consumers do if they find themselves in that situation?

Please note that FCAC does not oversee credit bureaus or how they use the data that they receive from banks, as credit bureaus are regulated at the provincial level.

However, as part of its role to protect financial consumers, FCAC also engages regularly with banks to discuss their reporting to credit bureaus and the Agency has communicated its expectation that the reporting of relief measures by financial institutions to credit rating bureaus should be done in such a way as to have no negative effect on an individual’s credit score.

FCAC has met both Equifax and TransUnion and has also communicated informally with many provincial regulators regarding this issue. Based on these discussions, it is our understanding that both credit bureaus have taken steps to minimize the effects of the COVID-19 pandemic on consumers’ credit standing and provided related information to consumers on their websites.

To help consumers better understand their credit reports, FCAC provides online resources with tips and information on how they can improve their credit score, correct errors and order their credit report, which should be consulted regularly for accuracy.

The financial impact of COVID-19 on Canadians

21. What long-term challenges might continue to exist following the crisis, and what role can FCAC play in providing long-term supports?

Protecting financial consumers is even more important now as Canadians face a period of economic uncertainty and recovery as a result of COVID-19.

Comments on consumer debt

Prior to COVID-19, household debt was at an all-time high and a significant number of Canadians live paycheque to paycheque.

In 2019, FCAC fielded the Canadian Financial Capabilities Survey which showed a growing segment of the population were facing challenges in managing their day-to-day finances and dealing with debt leading up to the COVID-19. Outstanding balances on debt was an issue of concern for many Canadians. Almost one third (31%) of Canadians believed that they had too much debt.

High levels of debt are more worrisome in times of economic crisis and make consumers more vulnerable to the impact of job loss or illness. Many Canadians have faced job loss, difficulty finding work, or inability to work because of illness due to COVID-19.

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Date modified:: 2021-06-09

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Appearance before the Standing Committee on Finance (July 7, 2020): Additional Q&As

Q&A’s related to FCAC’s response to COVID-19

The Government’s response to COVID-19

Banks’ response to COVID-19

The financial impact of COVID-19 on Canadians

Comments on consumer debt

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