Bill C-86, Budget Implementation Act, 2018, No. 2. (Bill C-86) received second reading in the House of Commons on November 6, 2018. Among other amendments, Bill C-86 proposes amendments to the Bank Act (Canada) (the Bank Act). Bill C-68 picks up from the amendments proposed to the Bank Act in 2016 under Bill C-29, Budget Implementation Act, 2016, No. 2, of which we previously reported in our e-Lert “Bank Act Amendments – New Consumer Protection Framework.” Bill C-86 consolidates provisions of the Bank Act and introduces new measures to strengthen provisions that apply to banks and authorized foreign banks in relation to consumer protection.
The following is an overview of some of the significant amendments proposed to the Bank Act by Bill C-86 in relation to the financial consumer protection framework.
Response to Marcotte and Bank Retail Sales Practices
The proposed amendments respond to the landmark Supreme Court of Canada decision in the trilogy of cases known as Marcotte, of which we previously reported in our e-Lert “Supreme Court of Canada Rules That Consumer Protection Laws Apply To Bank-Issued Credit Cards.”
Bill C-86 also responds to the findings and conclusions of the Financial Consumer Agency of Canada (FCAC) in its reports “Domestic Bank Retail Sales Practices Review” and “Report on Best Practices in Financial Consumer Protection.” The FCAC has oversight of federal consumer protection legislation that applies to federally regulated financial entities. The FCAC’s review of the domestic retail sales practices of Canada’s six largest banks stemmed from allegations publicized in Canadian media of mis-selling by bank employees of financial products and services to consumers.
Financial Consumer Protection Framework
The Bill C-86 proposed amendments require banks to designate an independent board committee with duties that include requiring management to establish procedures for compliance with consumer provisions, reviewing procedures for appropriateness for compliance, and requiring management to report at least once a year to the committee on the implementation of these procedures and other activities carried out by the bank in relation to consumer protection. The board committee would also have reporting obligations to the directors of the bank and the Commissioner of the FCAC.
Fair and Equitable Dealings
The fair and equitable dealings regime under the proposed amendments establishes, among other things, the following:
Retail Deposit Accounts
The proposed amendments include new disclosure provisions in respect of personal deposit accounts, requirements for retail deposit account openings upon provision by a person of specified identification documents, a prohibition on requiring a natural person to make a minimum deposit or maintain a minimum balance, provisions requiring banks to provide customers with a minimum amount of funds upon deposit of a cheque or other instrument, and modified requirements in relation to the cashing of government cheques.
Cost of Credit Disclosure to Business Customers
Currently, banks must disclose prescribed information, including the cost of borrowing, to natural persons other than for business purposes, prior to entering into a credit agreement with such person. The Bill C-86 proposed amendments expand disclosure requirements to business customers, requiring banks to provide information, to be prescribed, to business customers prior to entering into a credit agreement with such business customers.
Where a bank has imposed a charge or penalty in relation to a product or service, the bank will be required to credit or refund the amount of the charge or penalty, if it was collected but not otherwise provided for in the respective agreement, or credit or refund any excess amount that is greater than the amount of the charge or penalty provided for in the agreement. Banks will also be required to credit or refund a charge or penalty where the bank has not obtained the express consent of a person before providing the person with a product or service.
Banks with equity of $1 billion or more will be required to file a written statement with the FCAC Commissioner, within 135 days of financial year end, setting out the following information:
Bill C-86 proposes an enhanced complaints regime under the Bank Act, significantly expanding existing obligations of banks and authorized foreign banks. Under the complaints regime, banks will be required to:
A new whistleblowing regime is proposed for banks and authorized foreign banks under Bill C-86 with respect to any “wrongdoing.” Wrongdoing is defined as including a contravention of any provision of the Bank Act or the regulations made thereunder, a voluntary code adopted by the bank or a public commitment, and a policy or procedure established by the bank. Any employee of the bank who has reasonable grounds to believe the bank or any person has committed or intends to commit a wrongdoing may report the matter to the bank or the FCAC Commissioner, the Superintendent of Financial Institutions, any government or body that regulates or supervises financial institutions or a law enforcement agency. Policies and procedures will be required to be implemented for dealing with wrongdoing matters reported to the bank and prohibiting the bank from taking action against such employees (such as disciplining, harassing, suspending or demoting the employee).
Financial Consumer Agency of Canada Act Amendments
Bill C-86 also amends the Financial Consumer Agency of Canada Act (the FCAC Act). The FCAC Act delineates the FCAC's functions, administration and enforcement powers, and the provisions of federal law under the FCAC’s supervision. Proposed amendments to the FCAC Act include a requirement of the FCAC Commissioner to publicly disclose the nature of a violation, including the name of the person who committed it and the amount of the penalty. This power is subject to any regulations that may be published. The proposed amendments of the FCAC Act will increase the maximum penalty for violations of the consumer protection provisions of the Bank Act from $50,000 to $1,000,000 for natural persons and from $500,000 to $10,000,000 for financial institutions or payment card networks.