Appearance before the House Standing Committee on Industry and Technology (INDU) (October 10, 2024)

Study: Credit Card Practices and Regulations in Canada

About INDU

The House of Commons Standing Committee on Industry and Technology studies and reports on legislation and the activities and spending of the members of the Innovation and Economic Development portfolio, and other issues related to:

• innovation, industry and technology capability;
• telecommunications and digital policy;
• intellectual property;
• investment, competition, trade, small business and tourism; and
• rules and services that support the effective operation of the marketplace.

For committee member profiles and information on key personnel, please see Annex B.

Opening statement

By Supriya Syal
October 10, 2024
Ottawa, Ontario

Check against delivery

• Thank you, Mr. Chair, for the introduction, and to the Committee for inviting us to appear before you today.
• I will deliver my remarks in English.
• My name is Supriya Syal. I am the Deputy Commissioner of Research, Policy and Education at the Financial Consumer Agency of Canada, or FCAC.
• I am joined today by Frank Lofranco, Deputy Commissioner of Supervision and Enforcement.
• We welcome this opportunity to contribute to the Committee’s study of Credit Card Practices and Regulations in Canada.
• FCAC is an independent federal agency that protects the rights and interests of consumers of financial products and services.
• The Agency carries out its mandate in two principal ways.
• First, as a strong and effective regulator, we supervise the compliance of federally regulated financial entities, such as banks, with consumer protection measures set out in legislation, public commitments, and codes of conduct.
• Second, FCAC is responsible for the National Financial Literacy Strategy and works with stakeholders across the country to strengthen the financial literacy of Canadians and build their financial resilience.
• This includes:
  • collaborating with researchers and academics on behavioural science interventions that support positive financial outcomes, such as saving, budgeting, building financial confidence, and managing debt, including credit cards;
  • educating Canadians about their rights when dealing with financial institutions and providing consumers with unbiased and authoritative information about financial products and services, including credit cards;
  • providing free and easy-to-use online tools and calculators to help Canadians make informed decisions, such as our Credit Card Comparison Tool and Credit Card Payment Calculator; and
  • conducting research on financial well-being, and monitoring trends and emerging issues that affect financial consumers.
    • For example, since Aug 2020, we have been conducting a Monthly Financial Well-being Survey to study how Canadians manage their finances, allowing us to track changes in financial behaviours over time.
    • From this work, we know that in 2019, 27% of Canadians had to borrow money to pay for their day-to-day expenses. This increased to 37% in May 2024.
    • We make this information available on an online dashboard on Canada.ca
• FCAC’s policy research and evidence-based analysis on financial consumer protection supports the Department of Finance’s role in developing financial sector policy and legislation.

Supervisory role

• Regarding some of the questions on credit card regulations in the Committee’s study, FCAC oversees the compliance of federally regulated financial entities with regulations and codes of conduct for issuing and processing credit cards.
• It is important to note that companies regulated by provinces and territories also offer credit cards and these are subject to requirements in those jurisdictions.
• By law, federally regulated financial institutions, such as banks, must provide consumers with information in a manner, and using language that is clear, simple, and not misleading.
• This applies to disclosure documents such as application forms and agreements for credit cards. These regulations also stipulate that certain information must be included in monthly credit card statements.
• In 2022, the federal government introduced the Financial Consumer Protection Framework. This was a milestone for consumer protection in Canada.
• The Financial Consumer Protection Framework holds banks to a higher standard and requires them to take greater responsibility for consumer outcomes.
• The Framework introduced more than 60 new and enhanced consumer protection measures.
• Under the Framework, banks must provide more information to their customers so they can make informed and timely decisions about their finances
• And, banks must assess consumers’ financial circumstances and offer products and services that are appropriate to their needs.
• For credit cards, financial institutions must:
  • send electronic alerts automatically when the credit available falls below $100, or an amount set by the consumer;
  • obtain consumers’ express consent for credit limit increases; and
  • assess whether a credit card is appropriate for the consumer's circumstances, including their financial needs. For example, many premium credit cards include a variety of benefits for a higher annual fee which may or may not be appropriate for specific consumers.

The PCNO Code

• The Committee should also be aware that a revised Code of Conduct for the Payment Card Industry was announced last week and will take effect on October 30th.
• As part of its consumer protection mandate, FCAC will supervise the implementation of this Code by major payment card network operators, including VISA Canada, Mastercard Canada and Interac.

Financial Literacy Month

• Finally, I would like to mention that November is Financial Literacy Month in Canada. FCAC leads this important initiative.
• Throughout November, as part of a national campaign, we will be sharing information and resources with Canadians, and working with organizations from the private, public and non-profit sectors to advance financial literacy in Canada,
• Mr. Chair, that concludes my opening remarks. I look forward to the Committee’s questions.

About FCAC

Our raison d’être

The Financial Consumer Agency of Canada (FCAC) was established in 2001 to protect the rights and interests of consumers of financial products and services.

Our mandate

FCAC is a federal government agency that derives its mandate from the Financial Consumer Agency of Canada Act.

Our vision

To be a leader and innovator in financial consumer protection

Our mission

• To protect consumers of financial products and services
• To supervise regulated entities
• To educate Canadians and strengthen their financial literacy

Qs & As on FCAC’s funding

How is FCAC funded?

• FCAC is a federal government agency that operates largely on a cost recovery basis. It recovers its costs mainly through assessments against the regulated entities it supervises.
• In addition to revenues from these assessments, FCAC receives an annual statutory authority of a maximum of $5 million to support the financial literacy of Canadians.

Why does FCAC operate on a cost recovery basis and charges regulated entities an annual fee?

• Similar to other regulatory agencies, FCAC’s assessments place the burden of paying for financial sector regulation on the financial industry directly rather than on taxpayers.

ISSUE: Impact of credit card interest rates on consumers

From the INDU motion: A) …interest rates and examining of the impact of high credit card interest rates on Canadian consumers and potential measures to cap or regulate these rates…

Key messages

Regulatory

• FCAC’s mandate is to supervise the compliance of federally regulated financial entities, including banks, with their legislative obligations, codes of conduct and public commitments and to strengthen the financial literacy of Canadians.
• FCAC does not approve the level of interest rates; these are determined by the credit card issuers.

Complaints

• Financial entities are required to report to FCAC on the complaints they receive from consumers. This information helps the Agency identify concerns in the market conduct of financial institutions and gather information on trends and emerging issues.
  • Specifically: In 2023–2024, the Agency received over 260,000 reportable complaints from regulated entities. Of those complaints more than 70,000 were related to credit cards.^{Footnote 1}

For more information on complaints, see Annex A, ISSUE SHEET: Complaints Handling Process.

Research

• FCAC conducts research and monitors trends and issues that have an impact on financial consumers.
• Recent FCAC research indicates a decline in Canadians’ financial well-being over the past few years, as evidenced by changes from 2019 to 2024 such as an increase in the number of Canadians reporting credit card debt and a decline in the number of Canadians who pay down their credit cards in full.

Supplementary messages

On the Canadian Financial Capability Survey

• Historically conducted at 5-year intervals, now moving to 3-yr intervals, FCAC’s Canadian Financial Capability Survey sheds light on Canadians’ knowledge, behaviours and skills as they relate to financial decision-making and assesses how Canadians are doing on indicators of financial well-being.
• The survey was administered among approx. 8,000 Canadians, between February 14 and March 22, 2024. Data is still being analyzed and validated for publication in 2025, but we can share some preliminary results relevant to the committee’s study:
  • 32% of those surveyed in 2024 reported they had credit card debt, up from 29% in 2019.
  • 45% of respondents said they always pay their credit cards in full, down from 54% in 2019.
  • Among those who were struggling or falling behind with debt repayment, 15% of respondents said they missed one minimum payment on their credit cards in the previous 12 months, and 12% reported missing at least two consecutive months’ worth of minimum credit cards payments in the previous 12 months.

On the Financial Well-being Monitor

• Since August 2020, FCAC has been publishing data from its Monthly Financial Well-being Monitor. This survey collects survey data from approximately 1,000 respondents each month to understand and measure the financial well-being of Canadian financial consumers.
• The Monthly Financial Well-being Monitor shows similar trends as the Canadian Financial Capability Survey.
• For example, in 2019, 27% of Canadians had to borrow money to pay for their day-to-day expenses. This increased to 37% in May 2024.
• This, in part, could be attributed to the upward trend in credit card interest rates since 2019 according to data from the Bank of Canada. On average, monthly interest rates on outstanding credit card debt ranged between 18.86% and 19.35% in 2019, whereas in 2024 these rates ranged between 20.28 and 20.74%.

ISSUE: Credit card fees and charges

From the INDU motion: B) …fees and charges and an analysis of various fees associated with credit cards, including late payment fees, annual fees, and foreign transaction fees, and how these fees affect consumer finances…

Key messages

• FCAC does not approve the types of fees and charges that financial institutions can charge customers.
• FCAC regulates the compliance financial institutions with the disclosure, express consent and consumer provisions that apply to credit card products. For example, banks must meet requirements set out in the Financial Consumer Protection Framework, which is part of the Bank Act.
• FCAC also provides information and resources to help consumers make informed decisions about using financial products, such as credit cards.

Supplementary messages

On regulatory requirements

For messages on regulatory requirements for credit cards and related regulatory issues, see ISSUE: Consumer protection and credit cards.

On FCAC’s research

• FCAC conducts research and monitors trends and issues that impact financial consumers, including how Canadians are doing on indicators of financial well-being.

For messages on how fees and charges for credit cards affect consumer finances, see ISSUE: Impact of credit card interest rates on consumers.

On FCAC’s consumer information

• As part of our mandate to strengthen the financial literacy of Canadians, FCAC provides unbiased and authoritative information about financial products and services, including credit cards.
• FCAC’s consumer information and tools helps consumers manage their finances and make informed financial decisions.
  • FCAC receives over 6.5 million visits annually to its consumer information on Canada.ca.
• FCAC’s information about credit cards includes:
  • how to choose a credit card by comparing features such as interest rates, fees, rewards and benefits;
  • how interest is calculated and how payments are applied to outstanding balances; and
  • how to make a complaint to the card issuer.
• FCAC also provides free and easy-to-use online tools and calculators, such as our Credit Card Comparison Tool and Credit Card Payment Calculator.
  • The Credit Card Comparison tool was launched in 2014 and currently has 220 credit cards to compare, with a variety of interest rates, fees and rewards.
• FCAC also offers a credit card payment calculator that allows users to find out how long will take to pay off their credit card and explore options to pay it back faster.

On the National Financial Literacy Strategy

• The goal of FCAC’s National Financial Literacy Strategy is to help Canadians build financial resilience.
• The National Strategy calls on the financial ecosystem to help consumers develop the skills, capacity and behaviours that are key to financial resilience, rather than putting the onus on individual consumers.
• The financial ecosystem includes community groups, educators, researchers, the financial sector, the government, regulators and many other stakeholders.
• The ecosystem can support consumers in understanding financial products and services and making choices that support their financial resilience. For example, many consumers are unaware of the total long-term cost of debt due to compound interest and fees.
• Stakeholders can also help consumers with strategies for paying down their debts and avoid incurring additional debt-related costs. Helping consumers make informed borrowing choices using affordable credit options and lower-risk debt can help build financial resilience.

For more information on Financial Literacy Strategy and Consumer Education, please see ISSUE SHEET: Financial Literacy and Managing Credit Card Debt

ISSUE: Consumer protection and credit cards

From the INDU motion: C) …consumer protections and a review of these measures related to credit cards, with a focus on improving transparency in credit card terms, interest rates, and fees...

Key messages

• As part of its consumer protection mandate, FCAC oversees the compliance of federally regulated financial entities with legal requirements and codes of conduct for offering and selling credit card products and for processing credit cards.
• The requirements that apply to banks ae set out in the Financial Consumer Protection Framework, which is part of the Bank Act.
• It is important to note that companies regulated by provinces and territories also offer and help merchants process credit cards. These companies are subject to requirements set by those jurisdictions.

Disclosure

• By law, federally regulated financial institutions, such as banks, must provide consumers with information in a manner, and using language, that is clear, simple, and not misleading.
• This applies to disclosure documents such as application forms and agreements for credit cards.
• For example, the annual interest rates, how interest is calculated, minimum payments, annual fees and other charges must appear in an information box on the application form.
• The regulations also stipulate information that must be included in monthly credit card statements, such as itemized transactions, grace periods and minimum payment due dates, the annual interest rate, and outstanding balances.

Express consent

• Banks (and all FRFIs) must obtain consumers’ express consent before providing a product or service.
• Banks (and all FRFIs) must obtain consumers express consent before raising credit limits.

Changes made to interest rates and fees

• The decision to change the rate of interest on credit cards lies with a financial institution.
• • Federally regulated financial institutions must provide consumers with the details of changes to the features or the terms and conditions of a credit card, such as the annual interest rate, at least 30 days before the changes take effect. (The information must be in writing, in paper or electronic format depending on how the consumer has consented to receive information).

Interest rates

• The decision to set a specific interest rate on a credit card lies with the financial institution, provided they comply with their market conduct obligations, including those related to disclosure.
• Banks are also subject to the criminal rate of interest threshold in the Criminal Code, which is currently set at 60% annual interest and is applicable to most lending products in Canada, including credit cards.
• Effective January 1, 2025, the criminal rate of interest will become 35%. FCAC supports this change to protect vulnerable consumers.

Cancellation and unauthorized transactions

• There are protections in the Bank Act to protect consumers from unauthorised transactions, unless there is proof of gross negligence. Banks are liable for unauthorized credit card transactions.
• Consumers have the right to cancel credit card agreements.

For more information on unauthorized transactions, see Annex A, ISSUE SHEET: Credit card fraud and unauthorized transactions

Public commitments

• Several Payment Card Network Operators have made public commitments to protect consumers from the unauthorized use of their credit card.
• These commitments outline consumers’ liability in relation to fraudulent transactions on their credit card.

Financial Consumer Protection Framework

• In 2022, the federal government introduced the Financial Consumer Protection Framework. This was a milestone for consumer protection in Canada.
• The Financial Consumer Protection Framework holds banks to a higher standard and requires them to take greater responsibility for consumer outcomes.
• The Framework introduced more than 60 new and enhanced consumer protection measures.

Electronic alerts

• For credit cards, institutions must send electronic alerts automatically when the credit available falls below $100 or an amount set by the consumer.

Renewal notice

• Institutions must notify consumers in advance when products like credit cards are about to renew.
• These reminders must include details on interest rates, charges, and penalties.
• This helps consumers decide whether to renew or cancel the products or services.

Appropriate products

• Banks must also assess the financial circumstances of consumers and offer products and services that are appropriate to their needs.
• For example, many premium credit cards include a variety of benefits for a higher annual fee.
• Before issuing these cards to consumers, banks are expected to assess whether the product or service is appropriate for the person's circumstances, including their financial needs.

FCAC powers

• In 2018, the Government of Canada adopted legislation to modernize the Financial Consumer Protection Framework in the Bank Act.
• The legislation included new powers to better protect Canadians in their dealing with banks, which 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.
• Since 2019, FCAC has issued 7 Commissioner’s Decisions regarding violations of regulations related to credit cards. These are published on Canada.ca.
  • Negative option billing was the most common type of violation.

Code for Payment Card Industry

• A revised Code of Conduct for the Payment Card Industry was announced on October 1, 2024. It takes effect October 30, 2024.
• The Code is designed to ensure transparency, flexibility, and choice for merchants in managing payment card processing.
• The revised Code will help businesses to compare prices and offers from different payment processors.
• The Code also shortens the complaint handling response time for these businesses when they have issues with payment processors.
• In addition, the Code enables merchants to exit their card processing agreement without penalty when applicable fees are introduced, increased, or not fully reduced.
• FCAC’s role is to supervise the implementation of the Code by the major payment card networks operators (PCNOs) in Canada, including American Express Canada, Discover, Interac, Mastercard Canada, VISA Canada and UnionPay.
• The PCNOs require their network participants to comply with the Code through contracts and network rules.

For more information on the PCNO Code, see Appendix A: ISSUES SHEET: Code of Conduct for the Payment Card Industry

ISSUE: Predatory lending and credit cards

From the INDU motion: D) …investigate into predatory lending practices within the credit card industry and recommendations for stricter regulations to prevent exploitation of consumers…

Key messages

• FCAC conducts research and monitors trends and issues that impact financial consumers, including predatory lending.
• FCAC does not enforce the Criminal Rate of Interest, which is enforced under the Criminal Code.
• For many years, the Criminal Rate of Interest in Canada has been 60%. Effective January 1, 2025, the rate will become 35%. 
• FCAC supports this change to protect vulnerable consumers and continues to contribute to government efforts to protect Canadian consumers from predatory lending with supporting data analysis and research.

Consumer protections and credit cards

• Regulations governing federally regulated financial institutions include numerous provisions to protect consumers that are relevant to credit cards. For example:
  • Banks are prohibited entities from taking advantage of a person.
  • Banks must assess consumers’ financial circumstances and offer products and services that are appropriate to their needs. 
  • Banks are also required to ensure that remuneration of bank staff does not interfere with the requirement to offer products/services that are appropriate for the consumer.

For more messages about the regulatory requirements relevant to credit cards, see also ISSUE: Consumer protection and credit cards

Research – payday loans (outside of scope of motion)

• As part of its mandate, FCAC conducts research and provides evidence-based analysis on financial consumer protection issues, including payday loans.
• Payday loans are regulated at the provincial level, however FCAC shares concerns over the risks of payday loans; mainly that they are predatory, particularly to certain population groups and levels of financial literacy/education.
• FCAC’s research indicates that an increasing share of consumers who use payday loans face vulnerabilities, such as being behind on bills or not having emergency funds.
• Reliance on payday loans can stem from a lack of access to mainstream banking and can also contribute to further exacerbating the lack of access (e.g. debt cycles).

ISSUE: Financial literacy and managing credit card debt

From the INDU motion: E) …financial literacy with consideration of the role of financial literacy in helping consumers manage credit card debt and potential initiatives to enhance financial education...

Key messages – National Strategy

• FCAC strengthens the financial literacy of Canadians through collaboration with stakeholders, and through research and education.
• FCAC is the lead on the National Financial Literacy Strategy, 5-year plan to create a more accessible, inclusive, and effective financial ecosystem that supports diverse Canadians in meaningful ways.
• The National Strategy aims to advance positive financial outcomes for Canadians through changes in the ecosystem—either by removing barriers or catalyzing action—and provides a roadmap to guide stakeholders and help focus our collective efforts.
• Helping Canadians strengthen their financial literacy and, ultimately, their financial resilience – is a responsibility shared by the entire financial ecosystem, including other regulators and government bodies, the financial services industry, the private, non-profit and community sectors, financial literacy educators, researchers, and other key players.
• Along with managing savings and expenses, managing debt is one of the key consumer building blocks of the National Strategy.
• The National Strategy also identifies 6 priority areas that will improve the financial ecosystem for consumers, including reducing barriers by:
  • communicating in ways people understand;
  • building and providing for diverse needs; and
  • supporting increased digital access and digital literacy.
• And catalyzing action by:
  • enhancing access to trustworthy and affordable financial help
  • using behavioural design to simply financial decisions
  • strengthening consumer protection measures

Supplementary messages

On progress on the National Strategy

• The National Strategy is complemented by a Measurement Plan, launched in November 2022, which is designed to track progress towards the objectives of the National Strategy.
• The Measurement Plan has been adopted so far by 31 organizations across Canada, which have shared 60 findings from 41 initiatives with FCAC. It allows the financial ecosystem to:
  • measure impact
  • identify, track, and share progress
  • collectively agree on what works and what doesn’t to adjust and scale efforts effectively

Consumer Education

On the effectiveness of FCAC’s consumer information

• As part of our mandate to strengthen the financial literacy of Canadians, FCAC provides unbiased and authoritative information about financial products and services, including credit cards.
• FCAC’s consumer information and tools helps consumers make navigate the financial marketplace and make informed financial decisions.
• FCAC receives over 6.5 million visits annually to its consumer information on Canada.ca. This includes 27 pages providing consumers information on credit cards, including:
  • Credit cards and fees
  • Choosing a credit card
  • Consumer protection and credit cards
  • Managing debt and managing a credit card
  • Merchant information
• FCAC also provides free and easy-to-use online tools and calculators, such as our Credit Card Comparison Tool.
  • The Credit Card Comparison tool was launched in 2014 and currently has 220 credit cards to compare, with a variety of interest rates, fees and rewards.
• FCAC also offers a credit card payment calculator that allows users to find out how long will take to pay off their credit card and explore options to pay it back faster, including:
  • Making just the minimum payment each month
  • Making the minimum payment plus an additional amount each month
  • Paying a fixed amount each month

On the reach of FCAC’s ad campaign

• On January 15, 2024, FCAC launched a national advertising campaign titled “Housing Costs on Your Mind” that ran for approximately 11 weeks.
• The campaign objective was to equip Canadians with practical tools and resources to help them confidently make informed decisions about renting or buying a home and choosing, renewing and/or paying a mortgage.
• The budget was $2 million and included traditional radio, digital audio, out-of-home, social media, digital display and search engine marketing.
• The “Housing Costs on Your Mind” campaign pages on Canada.ca received more than 1 million visits. That is, over a million Canadians accessed FCAC’s tools and resources, as well as government programs and incentives.

On Financial Literacy Month

• November is Financial Literacy Month in Canada – a month-long campaign that brings together organizations and individuals from across the country that share a commitment to advancing financial literacy.
• For the past two years, Financial Literacy Month has focused on promoting tools and resources to help Canadians manage their debt in a challenging economic environment.
• Managing debt remains one of the most important things that Canadians can do to achieve positive financial outcomes in today’s economic environment.
• For Financial Literacy Month 2024, the campaign theme is “Money On Your Mind? Talk About It!” which reflects the importance of having open and honest conversations about money and finances.

Research

On the Canadian Financial Capability Survey

• Historically conducted at 5-year intervals, moving to 3-yr intervals starting 2024 FCAC’s Canadian Financial Capability Survey sheds light on Canadians’ knowledge, abilities and behaviours as they relate to financial decision-making and assesses how Canadians are doing on indicators of financial well-being.
• Data collected in 2024 is still being analyzed and validated for publication in 2025, but we can share some preliminary results relevant the committee’s study:
  • 46% of Canadians describe themselves as financially knowledgeable, up from 40% in 2019.
  • 52% of Canadians correctly answered a financial knowledge question about compound interest.

Behavioural Finance Lab and potential initiatives to enhance financial education

• FCAC’s Behavioural Finance Lab uses behavioural science and digital tools to conduct interventions and experiments to nudge consumers to make beneficial financial decisions.
• We share the results of these studies – what worked and what didn’t – with stakeholders who deliver financial literacy programs to help inform their work.
• One such study was conducted with users of Optimity, a healthy lifestyle app, from June 2022 to March 2023.
• We used behavioural science to design quizzes to provide participants with debt-relevant information, nudging those with credit card debt to improve their financial circumstances with strategies like paying more than the minimum on their credit card bills.
• Changes in debt levels, debt management strategies, financial confidence and stress levels around meeting credit card commitments were tracked over time as participants engaged with the intervention.
• While respondents in the Optimity study are not a representative sample of Canadians and data analysis is still in progress, some of the preliminary results show that participants who completed the intervention were significantly more likely to report decreases in debt over the 10-month testing period (compared to a control group).

ISSUE: Oversight and assessment of regulatory framework for credit cards

From the INDU motion: F) ...regulatory oversight including an assessment of the effectiveness of existing regulatory frameworks overseeing credit card companies and potential improvements to ensure fair and transparent practices...

Key messages

There are 2 aspects to this:

• FCAC supervises the application of the Financial Consumer Protection Framework.
• The Department of Finance Canada develops financial sector policy and legislation.

Regulatory requirements

For messages about the regulatory requirements relevant to credit cards, see also ISSUE SHEET: Consumer Protection for Credit Cards.

Supervision framework

• FCAC oversees the compliance of federally regulated financial institutions, including banks, with consumer provisions in federal legislation and regulations, including the Financial Consumer Protection Framework.
• A key goal of FCAC’s risk-based, outcome driven Supervision Framework is to proactively monitor market conduct issues and have federally regulated financial institutions address such issues on a timely basis, which may include the use of enforcement actions.
• FCAC’s Supervision Framework explains how the Agency conducts its supervision and enforcement work. FCAC employs a variety of supervisory tools across three pillars, namely promoting compliance with market conduct obligations, monitoring compliance with market conduct obligations, and enforcing compliance with market conduct obligations.
• FCAC does not comment publicly on its ongoing supervisory activities. However, FCAC describes its conclusions on the compliance of financial institutions with market conduct obligations in FCAC’s Annual Report.

ISSUE: Interchange fees and impact on merchants

From the INDU motion: G) …the practices related to interchange fees, and their consequences on the viability of merchants and on the prices charged to consumers…

Key messages

Regulatory requirements related to interchange fees

• Payment network participants are expected to meet commitments related to interchange fees under the Code of Conduct for the Payment Card Industry in Canada.
• For example, under the Code, network participants commit to:
  • disclose fees
  • notify merchants of fee changes within specified timeframes
  • respect merchants’ right to cancel agreements
• The Code is designed to ensure transparency, flexibility, and choice for merchants in managing payment card processing.
• FCAC’s role is to supervise the compliance with the Code by payment card networks operators (PCNOs), including American Express Canada, Discover, Interac, Mastercard Canada, VISA Canada and UnionPay.
• The PCNOs are responsible for embedding the Code's policies into their contracts or network rules and requiring their network participants to comply with the Code.
• FCAC does not oversee the setting of interchange rates.

For additional messages on the Code, see Annex A, ISSUE SHEET: Code of Conduct for PCNOs

Finance agreement with Visa and MC on interchange fees

• On October 1, 2024, the federal government announced an agreement with Visa and Mastercard to lower interchange fees for some businesses and non-profit organizations.
• Visa, Mastercard and the Department of Finance Canada would be better placed to provide information about this agreement.
• Refer to Finance.

Annex A: Other relevant topics

ISSUE: Code of Conduct for the Payment Card Industry

• The Code of Conduct for the Credit and Debit Card Industry in Canada has been revised and renamed as the Code of Conduct for the Payment Card Industry.
• The revised Code will come into effect in 2 phases. On October 30, the following sections come into effect:
  • Definitions
  • Disclosures and Communications
  • Policy Element 1b. Merchant Agreements
  • Policy Elements 5-13
  • Code Complaint Handling Process
  • Compliance Requirements
• The remaining sections of the Code, requiring complex or technical system changes, will come into effect on April 30, 2025.
• The Code is designed to ensure transparency, flexibility, and choice for merchants processing payment cards.
• FCAC’s role is to supervise the implementation of the Code by payment card networks operators (PCNOs), including American Express Canada, Discover, Interac, Mastercard Canada, and VISA Canada.
• The PCNOs are responsible for embedding the Code's policies into their contracts or network rules and requiring their network participants to comply with the Code.

On what is new in the 2024 Code

• The revisions to the Code clarify the requirements to be met by businesses offering payment card services in Canada. For example:
• The revisions clarify the types of organizations that must comply with the Code.
• The revisions specify the types of fees covered under the Code, as well as the information on fees, and fee changes, that must be disclosed to merchants.
• The Code modifies notification timing to now allow merchants’ time after the effective date of an applicable rate change to provide notice of their intent to exit their agreement.
• The Code modifies the provisions surrounding merchants’ right to exit their agreements without penalty, and the conditions to be met for exiting an agreement.
• The Code clarifies the requirements for the complaint handling process (CHP) that network participants must make available to merchants. For example, the CHP must include:
  • information about how and where to make a complaint
  • training for employees who handle merchant complaints
  • specific timeframes for addressing merchant complaints
• The revision allows for technical changes to the Code to be made at any time. The revision includes a commitment to review the Code after 3 years.

Supervision of Codes

• FCAC monitors the financial industry’s compliance with several codes of conduct.
• Industry codes of conduct such as the Code of Conduct for the Payment Card Industry are market conduct obligations.
• Companies that commit to Codes of Conduct are obligated to comply with the provisions.
• While supervision is intended to foster compliance among regulated entities, the responsibility for fulfilling their market conduct obligations remains fully with the regulated entities.
• FCAC’s Supervision Framework describes how the Agency supervises industry compliance with market conduct obligations set out in legislation, codes of conduct and public commitments.

Enforcement of Codes:

• FCAC may issue a Notice of Non-Compliance when an investigation determines there are reasonable grounds to believe that a regulated entity is in breach of its obligations under a code of conduct or public commitment. A Notice of Non-Compliance specifies the nature of the breach, but no AMP applies to it, nor does the Commissioner have authority to make public the name of the regulated entity.

For more on the Supervision Framework, see ISSUE: Oversight and assessment of regulatory framework for credit cards.

Usefulness of Codes of Conduct

• Codes of conduct are a viable tool for regulation of certain financial sector issues, as are public commitments.
• Codes establish standardized policies and practices that all members of an industry agree to and are expected to follow, and they are public and published on industry websites.
• The standardized policies and practices set out in codes of conduct allow the regulator to set supervisory expectations, for example expectations that apply to FCAC’s oversight (as set out in the Supervision Framework) include:
• Regulated entities are responsible for understanding their market conduct obligations and working proactively to ensure these obligations are met.
• Regulated entities must manage, or ensure the management of, the adoption of business practices, governance and independent oversight functions necessary to achieve compliance with the regulated entity’s market conduct obligations.
• Regulated entities must proactively identify, address and monitor risks, keep FCAC updated on their risks and controls, and report compliance issues as FCAC requires.
• Regulated entities are to proactively report to FCAC any material developments that could change their market conduct risk.

ISSUE: Complaint Handling Process

Key messages

• If a customer is not satisfied with a product or service from their financial institution, FCAC encourages them to file a complaint with their financial institution, and to follow its complaint handling process.
• The process includes the option to escalate the complaint to an impartial External Complaints Body if the consumer is unsatisfied with the resolution offered by their financial institution.

On Consumer complaints reported by regulated entities

• Since June 2022, banks must report to FCAC all records of consumer complaints.
• Prior to that, banks were only required to submit summary information about complaints to FCAC that regarded market conduct obligations (legislative and regulatory obligations, codes of conduct and public commitments overseen by the Agency).
• The enhanced information has strengthened the Agency’s ability to identify concerns in the market conduct of financial institutions and gather information on trends and emerging issues.
• In 2023–2024, the Agency received overv260,000 reportable complaints from regulated entities.

The top five products or services about which complaints from banks were reported in 2023–2024:

On complaints received directly from consumers

• Consumers may also report their complaints to FCAC.
• FCAC also provides authoritative and unbiased information for consumers on how to file complaints, but does not resolve individual disputes and does not provide redress or compensation.
• FCAC uses information from consumer complaints to inform its supervisory activities as outlined in FCAC’s Supervision Framework, and monitor trends and issues that may have an impact on financial consumers.
• In 2023–2024, FCAC received almost 6,800 complaints directly from consumers. Of those, only 283 were related to consumer protection measures that FCAC oversees. The top 5 categories and associated percentages are shown in the table below.

Consumer information Centre

• The volume of complaints related to credit cards has been steadily increasing over the past few years. Since 2021, the CIC has received a total of over 4000 complaints from consumers related to credit cards.
• The last fiscal year (2023-24) showed an increase in the number of complaints for fees and charges and complaint-handling, compared to the previous years.
• The top classifications for credit card complaints are Payment (16%), Collections (15%) and Fees/charges (14.5%).

*2024-2025 data partial year (April to September)

• There were over 120 complaints over past 1.5 years related to fees and charges, with the main issues being:
  • Currency conversion fee
  • Credit card annual fee
  • Interest (e.g. charged on full amount due and not remaining balance)
  • Overlimit fees
  • SME Interchange fee
• There were 55 complaints for the past 1.5 years related to interest, with the main issues being:
• How interest rates are set and calculated
• Increases (e.g. can bank increase interest rate, increased without notification)
• Payment (e.g. why interest charged on full amount when partial payment is made; why interest charged when payment is delayed by the bank)
• Cash advance versus regular purchases

ISSUE: Credit card fraud and unauthorized transactions

• FCAC oversees the compliance of regulated entities with federal regulations as they relate to unauthorized transactions, in particular debit and credit card transactions. Generally, any banking or credit card transaction that a consumer didn't make or approve is an unauthorized transaction.
• There are protections in the Bank Act to protect consumers from unauthorised transactions, unless there is proof of gross negligence. Banks are liable for unauthorized credit card transactions.
• FCAC's expectations with respect to investigations into allegations of unauthorized credit and debit card transactions are as follows:
  • Federally-regulated financial institutions (FRFIs) must weigh all relevant factors before finding the consumer liable, regardless of the method or technology used to process a credit or debit card transaction.
  • Specifically, FRFIs must conduct an investigation to determine whether circumstances beyond the cardholder's control (such as over-the-shoulder snooping, coercion, theft of the card, or system failure) resulted in an unauthorized transaction.
  • FRFIs may not rely solely on authentication technologies to discontinue or refuse to initiate an investigation into allegations of unauthorized transactions. For example, the consumer's liability cannot be based solely on the fact that the transaction was made using the correct chip and PIN.
• Consumers who have experienced banking-related fraud and are not satisfied with the resolution offered should also file a complaint with their bank.

On FCAC’s role in fighting fraud

• FCAC’s role as a regulator is to monitor unauthorized transactions when it comes to debit and credit cards.
• FCAC also conducts research into a variety of consumer finance-related subjects, including the incidence and impact of fraud.
• Although FCAC’s data is still being analyzed, we have preliminary findings from the 2024 Canadian Financial Capability Survey.
• According to the preliminary findings of the 2024 CFCS, 37% of Canadians have discovered that someone has used their bank or credit card number to pay for goods without their authorization (over their lifetime)
• FCAC’s Monthly Financial Well-Being Monitor shows that around 10% of survey respondents were victims of fraud or scams in the past two years.
• FCAC has been monitoring this issue and is very active in this area. We provide research insights and have been working with the Department of Finance on their legislative review. This includes Finance’s consultation paper with several consumer protection measures to tackle the risks of fraud and scams. You may wish to refer to the consultation paper for more details.

Info for consumers on recognizing and reporting unauthorized transactions

• In support of its consumer education role, FCAC provides unbiased and fact-based information to help consumers understand how to protect themselves from financial fraud and scams.
• If a bank customer thinks an unauthorized transaction was made using their card or account, or if there is a risk of this happening, they should:
  • change their passwords immediately
  • notify their bank or credit card issuer immediately
  • report any transactions they did not make or approve
• Canadians who think they are a victim of fraud should contact their local police. They can also report the incident through the Canadian Anti-Fraud Centre's fraud reporting system.
• The Canadian Anti-Fraud Centre is the federal leader in fraud protection and provides information on scams, tips to help people protect themselves from fraud, and step-by-step information for Canadians on what to do if they are a victim of fraud.

ISSUE: Low-cost/no-cost bank account commitment

• In fall 2023, the Minister of Finance directed FCAC to work with banks to update the original Low-cost and No-cost Commitment from 2014.
• FCAC was tasked with expanding the features of low-cost accounts to reflect modern banking, expanding the accessibility of no-cost accounts to more Canadians, and expanding the list of financial institutions that sign on to the updated commitment.
• As part of this work, FCAC met with financial institutions, experts in the field of financial consumers, and other stakeholders. We also invited public views and conducted research into consumer awareness and needs.
• Our research shows that vulnerable consumers in particular would benefit from having access to no-cost accounts.
• Key insights from FCAC’s engagements and research, including a public opinion survey, include the following:
  • Accounts with no or low monthly fees and a greater number of transactions per month are important features for most Canadians.
  • Few Canadians are aware of the existing public commitment to provide low-cost or no-cost account options. 84% of participants in FCAC’s public opinion research were unaware of the public commitment.
  • For consumers facing financial vulnerability, some do not have a chequing account at all and for those that do, many don’t have access to no-cost accounts at the banks signed on to the Commitment (though they would have access to no-cost accounts at other banks that offer no-cost banking to all Canadians).
• We are committed to moving forward and optimistic that, with industry collaboration, an improved commitment can be implemented.

ISSUE: Other jurisdictions

• FCAC monitors and evaluates trends, such as new regulations in other jurisdictions, and emerging issues that may have an impact on consumers of financial products and services.
• The Department of Finance Canada develops financial sector policy and legislation.

On jurisdictional scans and international engagement

• FCAC continues to engage in various international fora, including the OECD’s International Network on Financial Education, the G20/OECD Task Force on Financial Consumer Protection and the G20 Global Partnership for Financial Inclusion.
• These engagements facilitate the exchange of best practices and inform the development of policies, research, and measurement tools to promote financial well-being, consumer protection, and inclusion.
• For example, FCAC contributed to and leverages research such as the 2024 OECD Consumer Finance Risk Monitor which cited credit as a financial product or service giving rise to consumer detriment. Credit cards were cited by 39% (preceded only by mortgages) as giving rise to consumer detriment.
• Some interesting observations from this work include:
  • Credit providers must include a minimum repayment warning on the front page of the statement and must set out some information, including how long it will take to pay off the balance if only minimum repayments are made and the saving the consumer would make if they repaid the closing balance within two years (Australia).
  • The minimum required must be set at an amount equal to at least that amount which repays the interest, fees and charges plus one percentage of the amount outstanding (U.K.).

On recent developments in foreign jurisdictions

• In the UK, the Treasury is planning to hand new powers to “high street” banks to put a hold on payments of up to 4 days to investigate payments suspected of being fraudulent.
• In the U.S, the Consumer Financial Protection Bureau issued in March 2024 a rule limiting late fees on credit cards to 8$. The rule is now on hold due to legal proceedings.
• The CFPB also recently sued Horizon Card Services for tricking consumers into signing up for its credit card, which could come with almost $300 in annual fees on a card with a $500 credit limit but could only be used to purchase goods from the company’s overpriced online store and nowhere else.

ISSUE: NSF fees

• In Budget 2024 the government announced its intent to cap the NSF fees charged by banks to $10 per instance, as well as:
  • requiring b anks to alert consumers that they are about to be charged an NSF fee, and providing a grace period to deposit additional funds to avoid the fee;
  • prohibiting multiple NSF fees when the same transaction reoccurs;
  • restricting the number of NSF fees that may be charged to one in every 72-hour period;
  • prohibiting NSF fees for small overdrawn amounts under $10.
• The government will release draft NSF fees regulations in the coming months.
• FCAC welcomes this move to better protect financial consumers and is working with the Department of Finance to better understand how this aligns with the provisions of the Financial Consumer Protection Framework.

Annex B: Committee member profiles