Commissioner’s enforcement powers (transition binder 2019)

The Financial Consumer Agency of Canada Act

Introduction

• The Financial Consumer Agency of Canada Act (Act) establishes the Agency and its mandate to enforce the legislative and non-legislative requirements that apply to federally regulated financial institutions (FRFIs)
• It assigns powers to the Commissioner and incorporates those provided for in the statutes listed in Schedule 1 of the Act, namely the
  • Bank Act
  • Trust and Loan Companies Act
  • Insurance Companies Act
  • Payment Card Networks Act
  • Green Shield Canada Act
  • Cooperative Credit Associations Act

Powers

• The Commissioner exercises powers as an authority that is separate and at arms’ length from the Minister of Finance. Examples include the power to
  • Examine and inquire into the compliance of FRFIs with statutory provisions or regulations (referred to as “consumer provisions” in the Act)
  • Initiate violation proceedings and impose penalties for non-compliance
  • Make public the nature of a violation, the name of the person who committed it, and the amount of the penalty imposed

Proceedings

• The Act sets out the framework for proceeding against a FRFI for non-compliance with
  • A compliance agreement
  • Consumer provisions
• To initiate proceedings a notice of violation (NOV) must be issued alleging reasonable grounds to believe that a violation has been committed
• The FRFI has 30 days to make representations (or longer, with the Commissioner’s approval)

Response options to the NOV

The FRFI can

1. Pay the penalty proposed in the NOV
2. FRFI is deemed to have committed the violation and the proceedings end
3. Commissioner makes no decision on the violation
4. Commissioner may make a decision on naming

1. Make representations
2. Proceedings continue
3. Commissioner makes decision on the violation and penalty amount
4. Commissioner may make a decision on naming

1. Do nothing
2. FRFI is deemed to have committed the violation, but proceedings continue
3. Commissioner must determine the penalty amount
4. Commissioner may make a decision on naming

Decision on the violation

• The Commissioner must decide, on a balance of probabilities, whether the FRFI committed the violation
• Any defences put forth by the FRFI must be made out on a balance of probabilities
• The Commissioner’s decision can be appealed to the Federal Court within 30 days of being served 

Decision on naming

• The Commissioner may make public the name of the FRFI that committed the violation, the nature of the violation and the amount of the penalty imposed
• Naming a FRFI allows the Commissioner to disclose information that would otherwise be subject to a duty of confidentiality regarding information about the business or affairs of a FRFI
• The decision on naming may be judicially reviewed

The Bank Act

Powers

• The Commissioner has the power to conduct examinations for the purpose of assessing compliance with the consumer provisions
• The Commissioner may enter into a compliance agreement for the purpose of furthering compliance with the consumer provisions
  • Compliance agreements can be used alone or in conjunction with an NOV as a tool to ensure FRFIs’ compliance

Legislative framework

• Defines the legislative and regulatory obligations for federally regulated banks and foreign banks (collectively “banks”)
• Contains consumer provisions to regulate banks’ dealings with its customers and the public
• Includes rules in relation to
  • The responsibilities of directors (s. 157(2)(e) and (f))
  • The disclosure and charges for deposit accounts and prescribed products (s. 413.1 and ss. 439.1 – 448.2)
  • The calculation, disclosure and rebate of borrowing costs (s. 418.1 and    ss. 449 – 454)
  • The Banks’ complaint handling procedures as well as the designation of external complaints bodies and informing consumers how to contact FCAC if they wish to make a complaint (ss. 455 – 456)
  • Miscellaneous activities such as the imposition of charges, the cashing of government cheques, the holding of funds, tied selling, the closure of branches, public accountability statements and affiliates (ss. 457 – 459.5)

Regulatory framework

• Legislation is supported by a comprehensive set of regulations that address a wide spectrum of consumer matters
  • Credit issues: cost of borrowing disclosure/financial institutions business practices/debt collection/mortgage insurance disclosure, etc.
  • Access to basic banking services: account opening and government cheque cashing, etc.
  • Deposit account: disclosure of interest and charges, etc.
  • Investment products disclosure: Guaranteed Investment Certificates, term deposits, Principal Protected Notes, etc.
  • Disclosure for registered plan (e.g., RRSPs, RESPs)
  • Negative option billing
  • Access to funds
  • Complaint handling process
  • Procedures for branch closures
• The majority of FCAC’s enforcement activities center on the Bank Act consumer provisions and their related regulations
  • Much of the substantive content is, in fact, currently contained in those regulations – examples:
    • the Cost of Borrowing (Banks) Regulations
    • the Credit Business Practices (Banks, Authorized Foreign Banks, Trust and Loan Companies, Retail Associations, Canadian Insurance Companies and Foreign Insurance Companies) Regulations
    • the Access to Basic Banking Services Regulations
    • the Notice of Branch Closure (Banks) Regulations
• Other Bank Act provisions relevant to enforcing the consumer provisions include
  • Duty to provide information to the Commissioner (s. 657)
  • Commissioner’s requirement to periodically conduct examinations for the purpose of assessing compliance with the consumer provisions (s. 658)
  • Authority to enter into a compliance agreement for the purpose of furthering compliance with the consumer provisions (s. 659)
    • Compliance agreements are compliance tools that are often used – alone or in conjunction with a NOV – as a means to get financial institutions into compliance;  failure to comply with a compliance agreement may also be the subject of a NOV

Other statutes

Powers

• The Commissioner has the power to conduct examinations for the purpose of assessing compliance with the consumer provisions under the:
  • Trust and Loan Companies Act
  • Insurance Companies Act
  • Payment Card Network Act
• The Commissioner may enter into a compliance agreement for the purpose of furthering compliance with the consumer provisions

Legislative framework: Other statutes

Other statutes contain similar consumer provisions as they apply to the financial institutions governed by those enactments:

Trust and Loan Companies Act
Defines the legislative and regulatory obligations for all federally regulated trust and loans companies

Insurance Companies Act
Defines the legislative and regulatory obligations for all federally regulated insurance companies

Cooperative Credit Association Act

Payment Card Network Act
Defines supervisory power over payment card network operators