Standing Senate Committee on National Finance (NFFN) (May 28, 2024)
ISSUE: The Financial Consumer Protection Framework

Key points

• In 2018, the Government of Canada adopted legislation to modernize the Financial Consumer Protection Framework in the Bank Act.
• Since June 30, 2022, Canadian consumers benefit from new and enhanced protections when dealing with banks.
• The protections are part of Canada’s new Financial Consumer Protection Framework (the Framework) that applies to banks, authorized foreign banks and federal credit unions.
• The new and enhanced protections include:
  • additional and timely information to help you with decision-making, such as: 
    • new electronic alerts
    • advance notice when it’s time to renew products and services
    • separate agreements for optional products and services
  • higher standards for bank sales practices, such as:
    • offering or selling products and services that are appropriate for your financial needs
    • getting your express consent for all products and services
    • broader protections against providing false or misleading information
    • broader protections against taking advantage or applying undue pressure
  • resolving customer issues:
    • more effective and timely complaints handling
    • requirement to provide refunds and credits (redress)
  • increased limit for cashing a Government of Canada cheque
  • whistleblowing program for bank employees

FCAC powers

• The legislation also provided the Financial Consumer Agency of Canada (FCAC) with new powers to better protect consumers in their dealings with banks. FCAC’s new powers came into force in April 2020. They include the power to:
  • impose a penalty of up to $10 million on banks per violation of their legal obligations
  • direct banks to take actions to comply with their legal obligations
  • direct banks to undergo a third-party, independent audit to comply with their legal obligations
• The Framework addresses issues raised by FCAC in its reviews of banks. The reviews highlighted key areas where consumers of bank products and services could be better protected, and where the oversight of banks could be strengthened.
• The Framework is also based on extensive consultations with stakeholders across Canada.

Qs & As

1. What have the results been since the Financial Consumer Protection Framework was implemented in June 2022?

• The Framework is an important milestone in consumer protection that holds banks to a higher standard and requires them to take greater responsibility for consumer outcomes. The Framework also gave FCAC additional powers to strengthen its supervisory authority.
• Banks are now required to designate a committee of their board of directors to oversee their compliance with consumer provisions. These committees must also report to FCAC how they are exercising their challenge and oversight role.
• As a result of the Framework, banks must strengthen their complaint-handling procedures and, for the first time, are required by law to deal with complaints within a specific period (56 days). The Framework also requires banks to submit more comprehensive complaints data to FCAC.
• The Agency developed a secure complaint-reporting portal that banks now use to submit consumer complaint information. Complaints data captured through the portal are used to enhance the Agency’s understanding of consumer risks and to improve processes that can help detect and respond to compliance issues.
• The Framework also required banks to set up a whistleblower program, to encourage bank employees to report any alleged wrongdoings (to the institution, FCAC and other regulators, or a law enforcement agency) without the risk of reprisal.
• The Agency has conducted thematic reviews of banks’ implementation of their new obligations under the Framework for electronic alerts and complaint-handling. The reviews focus on small- and medium-sized institutions. FCAC will publish the results of these reviews later this year.
• FCAC also established a regulatory data analytics and reporting team in 2022–2023, to enhance its operational analytics capability. The new team leverages complaints data submitted by financial institutions along with other information collected by the Agency to identify emerging issues and risks. This allows FCAC to allocate resources in a proactive and risk-based manner.

Example: Broader definition of complaints

• The Framework broadened the definition of complaints that banks must report to FCAC.
• Under the Framework, banks must treat any customer expression of dissatisfaction as a complaint, and deal with it per required complaint handling procedures.
• All such complaints must be reported to the Agency.
• As a result, we have seen a very large increase in the number of complaints reported to FCAC.
• For example, since the FCPF came into force, we receive approximately 60K complaints per quarter. Previously we received 4K per quarter.
• Fortunately, most complaints have already been resolved when we receive the quarterly data.
• The top 3 products about which we receive the most complaints are Accounts, Credit Cards, and Mortgages.
• The top 3 issues about which we receive the most complaints are transactions, fees, and complaint handling.