The Financial Consumer Protection Framework: enhanced protection for bank customers
Since June 30, 2022, you now benefit from new and enhanced protections in your dealings with banks.
The protections are part of Canada’s new Financial Consumer Protection Framework (the Framework). The Framework applies to banks, authorized foreign banks and federal credit unions.
Additional and timely information to help you with decision-making
Banks must disclose more information to you about your day-to-day banking. This will help you make informed and timely decisions about your finances and protect you from financial harm.
New electronic alerts
Your bank must send you electronic alerts in 2 situations:
- when the balance of your chequing or savings account falls below $100 or an amount you’ve set
- when credit available on your credit card or line of credit falls below $100 or an amount you’ve set
Your bank will automatically set the electronic alerts to $100. You may ask your bank to set them to a different amount.
Your bank will send the alerts to you automatically. You don’t have to sign up, but you may opt out at any time by informing your bank in writing. This can be done by email.
The alerts don’t apply to accounts opened for business purposes.
The electronic alerts will tell you when you’re close to going into overdraft or over your credit limit. They are intended to help you manage your accounts and avoid fees.
Advance notice for the renewal of products and services
Your bank must send you timely reminders when some of your products and services are set to renew. This also applies to any automatic rollover or promotional offer that will expire. These reminders will help you decide if you want to renew or cancel your products or services. They will include information on any rates or fees that apply.
For products or services with terms of 30 days or more, you’ll receive 2 reminders:
- 21 days before the end of your term
- 5 days before the end of your term
If your term is less than 30 days, you’ll receive one reminder 5 days before the end of your term.
For example, if you have a credit card with a promotional rate of 1.5% for the first 29 days, which would then increase to 19.9%, you’ll receive a reminder 5 days before the end of your term.
You'll receive the reminders by mail, push notification, text message, or email. It will depend on the preferences you’ve set up with your bank and the systems they have in place. The reminders must include the interest rates, charges and/or penalties that will apply at the end of your term.
If the product is a deposit-type instrument, like a Guaranteed Investment Certificate (GIC), banks must also provide a website or telephone number where you can get the current interest rate.
For renewals or rollovers, the notices won’t apply to:
- mortgages secured on real property
- products or services used for business purposes
For promotional, preferential, or other offers, the notices won’t apply to:
- optional products or services, such as loan insurance
- products or services used for business purposes
Separate agreements for optional products and services
Your bank must provide you with a separate agreement for each optional product and service you agree to buy.
Each separate agreement must include:
- a description of the optional product or service
- the term of the agreement
- a list of all fees that apply
- the conditions to cancel the agreement
- the date the product or service is available for use
- the steps required to use the product or service
The new separate agreement will help you understand what you’re agreeing to buy, how much it will cost, and how to cancel the agreement.
Higher standards for bank sales practices
Banks’ sales practices are held to a higher standard.
Products and services that are appropriate for your needs
Your bank must offer and sell you products or services that are appropriate for your needs. They must collect and assess information to understand your financial needs. This will help them get to know you and provide you with products and services that reflect your circumstances. They also must tell you if they’ve assessed that a product or service isn’t appropriate for you.
Banks must ensure that the way they pay their employees doesn’t interfere with their obligation to sell products and services that are appropriate for your needs. For example, a bank employee should not get a bonus for meeting a sales target if they sold an inappropriate product to you.
Getting your express consent for products and services
Express consent means that you must clearly agree to a financial product or service in writing or verbally before a bank can provide it to you.
If you give consent verbally, your bank must provide you with a written confirmation.
For each product or service, a bank provides to you, they first must:
- get your express consent
- provide you with a copy of the agreement
This is a broader protection than the one previously in place. Banks are no longer allowed to get consent for multiple products in a single agreement.
This will provide you with clear information about the costs and benefits of each product and service you buy.
Your use of a product or service doesn’t qualify as giving express consent.
Broader protections against providing false or misleading information
Previous protections that prohibited banks from communicating or providing false or misleading information have been improved. These broader protections apply to you, the public and FCAC generally. They also apply to all bank communications, including those relating to the products or services that banks provide.
FCAC’s power to impose monetary penalties for false or misleading information now extends to all bank communications.
Broader protections against taking advantage or applying undue pressure
Banks are specifically prohibited from taking advantage of you or applying undue pressure or coercing (forcing) you for any purpose. Generally, undue pressure means any pressure that could reasonably be considered excessive or persistent.
This is a broader protection than the one previously in place before June 30, 2022, that prohibited banks from engaging in “coercive tied selling” or “forced purchases”. This happens when a bank refuses to sell a certain product unless the customer agrees to buy something else.
Resolving customer issues
All banks must have procedures to deal with complaints. This includes access to an independent and impartial review by an external complaints body (ECB).
More effective and timely complaints handling
Banks must strengthen their complaint-handling procedures.
For example, banks now have 56 days to deal with your complaint from the day you make it.
Before June 30, 2022, there wasn’t any regulatory requirement on banks to deal with complaints in a specific number of days. Under FCAC’s previous guidelines, banks had 90 days to resolve complaints from the day they were escalated to an employee designated to deal with complaints.
Banks must now also:
- treat any expression of dissatisfaction over a bank product or service or the way a bank product or service is sold or provided as a complaint
- provide written acknowledgement to you of the date on which the complaint was received
- not mislead you through terms such as ombudsperson, to suggest that bank employees who handle your complaint are independent
- disclose to you their procedures for dealing with complaints and other necessary information, such as:
- the employees designated to receive and deal with complaints
- the contact information for the external complaints body they are a member of
- FCAC’s contact information
Your bank must help you navigate its complaint-handling process. This is to make sure you understand the steps it involves. The steps include how to refer a complaint to an external complaints body.
ECBs have 120 days to deal with a complaint they received and make a final written recommendation to the parties. Under the Framework, ECBs now must also make a summary available for free on their website 90 days after making their final recommendation.
Requirement to provide refunds and credits (redress)
Banks have to refund or credit you any fees or penalties they’ve charged you in connection with a product or service if:
- the charges or penalties weren’t disclosed to you in an agreement or were disclosed incorrectly
- you didn’t provide express consent for the product or service
They also have to pay applicable interest on these amounts.
This could apply to products such as a chequing account or a loan.
Increased limit for cashing a Government of Canada cheque
The maximum amount you can cash a Government of Canada cheque for free at any bank, increased to $1,750. That’s even if you’re not a customer of that bank.
Under previous law, the limit was $1,500.
You still must show acceptable identification.
Whistleblowing program for bank employees
Consumer protection has been strengthened by new obligations that protect bank employees.
Banks must have a whistleblowing program for employees that:
- deals with wrongdoings reported by their employees
- prohibits them from taking reprisal action against employees who report wrongdoings, such as suspending, demoting or disciplining them
Bank employees will be able to report wrongdoings to:
- the bank
- a government agency or body that regulates or supervises banks such as the:
- Financial Consumer Agency of Canada (FCAC)
- Office of the Superintendent of Financial Institutions (OSFI)
- a law enforcement agency
These new measures will encourage bank employees to come forward if they notice problems while working at a bank. They’re often the first to know of and can help expose and address problems that could otherwise go unreported.
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