Bill C-86 Set to Strengthen Financial Consumer Protection

Article by Peter A. Aziz & Eli Monas – Torys LLP

The Budget Implementation Act, 2018, No. 2, Bill C-86 (Bill), was introduced in the House of Commons on October 29 and received Royal Assent on December 13. Once in force, the Bill will consolidate existing consumer provisions and regulations and strengthen consumer protection provisions that apply to banks and authorized foreign banks under the Bank Act (BA).

The consumer framework is intended to address many of the issues raised as part of the Financial Consumer Agency of Canada’s (FCAC) “Domestic Bank Retail Sales Practices Review” and “Report on Best Practices in Financial Consumer Protection.” While a full understanding of the proposed regime must await the government’s release of draft regulations, this article sets forth, at a very high level, the new framework's most impactful proposals.

Enhanced Board Accountability to Consumer Protection

Under the proposed regime, board oversight of compliance with consumer provisions would be broadened by requiring banks to designate a committee responsible for ensuring the bank’s compliance with the new provisions. The committee would:

  • require bank management to establish procedures for complying with the consumer provisions;
  • review those procedures to determine whether they are appropriate to ensure the bank is complying with the provisions; and
  • require management to report at least annually to the Committee on the implementation of the procedures and on any other activities the bank carries out in relation to the protection of its customers.

Promotion of Responsible Business Conduct

The new framework provides for a wide range of new requirements intended to encourage responsible business conduct and the fair treatment of consumers.

One of the most significant changes will be the banks’ obligation to establish and implement policies and procedures to ensure the products or services offered or sold are appropriate, having regard to the person's circumstances, including their financial needs. Although the bank’s responsibility is limited to the establishment of policies and procedures, the new requirement is significant when read in combination with the provisions requiring banks to ensure that:

  1. remuneration, payment or benefit available to officers and employees does not interfere with their ability to comply with these policies and procedures, and
  2. officers and employees are trained in the bank’s policies and procedures for complying with the consumer provisions.

Several other provisions that also promote responsible business conduct are listed below.

  • A prohibition from communicating or providing false or misleading information to a customer, the public or the FCAC Commissioner;
  • A general prohibition, added to the tied selling restriction, against imposing undue pressure on a person for any reason or taking advantage of a person;
  • An extension of certain consumer protection provisions to business customers;
  • The introduction of a cooling off period, during which a consumer can cancel an agreement for certain products or services without any cancellation charge;
  • A requirement to send an electronic alert if a person’s deposit account balance, or the amount of credit available on the person’s line of credit or credit card, falls below a set amount;
  • A prohibition against imposing any charges for optional products or services under promotional, preferential, introductory or special offers on the day the promotion ends without obtaining the person’s express consent;
  • Redress provisions requiring banks to credit or refund any charge or penalty imposed where such charge or penalty was not provided for in an agreement or where the excess amount of the charge or penalty is greater than the amount provided for in an agreement. Banks will also be required to credit or refund any charge or penalty if the bank provides the product or service without first having obtained the customer's express consent; and
  • A new whistleblowing regime in respect of any “wrongdoing.”

A More Robust Complaints Reporting Regime

The proposed complaint-reporting framework will significantly expand the banks' responsibilities. Three of the more important aspects of this new regime are:

  • a new provision which broadly defines a “complaint” as any dissatisfaction—whether justified or not—with respect to a product or service or the manner in which the product or service is offered, sold or provided;
  • a requirement for the banks to make a comprehensive record of each complaint including information as to how the institution attempted to resolve the complaint and any paid compensation; and
  • the obligation to submit quarterly reports of each complaint to the FCAC Commissioner.

Beefing up FCAC penalties

The Bill also proposes several amendments to the Financial Consumer Agency of Canada Act (FCAC Act), including:

  • an increase in the penalties for a violation of the Bank Act to $1 million for natural persons and $10 million in the case of financial institutions or payment card networks (the maximum penalties are currently $50,000 and $500,000 respectively); and
  • a provision requiring the Commissioner to make public the nature of a violation, the name of the person who committed it and the amount of the penalty imposed.

The Bill's reinforced financial consumer protection framework and FCAC's modernized supervision framework launched in October will transform the banks' approach to financial consumer protection.