On October 25, 2016, Bill C-29, Budget Implementation Act, 2016, No. 2 (the Bill) received first reading in the House of Commons. The Bill proposes amendments to the Bank Act (Canada) (the Amendments) creating a new Part XII.2, Dealings with Customers and Public, which consolidates the existing consumer protection provisions, streamlines provisions that apply to banks or authorized foreign banks in relation to consumer protection, and introduce some new measures. Given the expansion of consumer protection measures over the past several years, consolidating the provisions in the new part is a welcome improvement to the Bank Act.
A Response to Marcotte
The Amendments also respond to the landmark Supreme Court of Canada decision in Bank of Montreal v. Marcotte (and the two companion cases), by incorporating language into the Act to strengthen the argument in favour of the exclusive federal jurisdiction over products and services offered by banks. The amendments now clarify the legislative purpose of the consumer protection measures as providing a "comprehensive and exclusive regime in relation to an institution's dealings with its customers and the public in relation to banking products and services" in order to provide "uniform protection on a national level", allowing the financial institutions to carry on business "consistently and effectively on a national level" and "ensure uniform supervision of institutions and enforcement" of consumer protection provisions. The new part explicitly stated to be, unless specified, paramount to any provincial law or regulation that relates to consumers or to business practices with respect to consumers.
The amendments provide that the new part is based on certain regulatory principles. Those principles are:
- Basic banking services should be accessible.
- Disclosure should enable customers and the public to make informed financial decisions.
- Customers and the public should be treated fairly.
- Complaints processes should be impartial, transparent and responsive.
- The banks should act responsibly, considering their customers.
Presumably, these principles will inform the interpretation of the specific consumer protection measures contained in the new Part.
The Amendments will require the board to designate a board committee to oversee the bank's adherence to the procedures established to ensure compliance with the consumer protection measures. Management must report at least annually to the committee and the board is required to report at least annually to the Commissioner of the Financial Consumer Agency of Canada on the steps taken by the committee during the year.
New Consumer Protections
The Amendments provide consumers with cancellation rights, similar to the cooling-off periods in certain provincial consumer protection legislation, to cancel agreements providing ongoing products or services within prescribed time periods. If the agreement is entered into by phone or mail, then the consumer can cancel it within a prescribed period or, if there is no prescribed period, until the end of the 14th business day after the date the agreement is entered into. For agreements entered into in any other manner, the consumer can cancel within a prescribed period or, if there is no prescribed period, then until the end of the third business day after the date the agreement is entered into.
Upon receiving notice of cancellation, the banks will be required to waive any cancellation charges and are limited to recovering only amounts related to the consumer's use prior to cancellation, expenses reasonably incurred in providing the product or service and any prescribed amount.
Details on the prescribed periods and amounts will be provided in the regulations.
The Amendments also require a bank to disclose information before it makes certain amendments to a term or condition of an agreement by which it provides products or services in Canada. The regulations will specify the types of amendments and the disclosure requirements.
The new part prohibits taking advantage of consumers who are not able to protect their own interests and prohibits other conduct that will be set out in the regulations. The regulations may incorporate similar unfair practises that are currently included in certain provincial consumer protection laws.
The Amendments have been anticipated since the release of the March 2015 federal budget, which referred to an exclusive financial consumer protection framework for the banks. It is not yet known when the Amendments will be brought into force, however, it is expected that the Amendments will be proclaimed into force once the regulations, which will include key details on the new measures proposed, have been finalized. A transitional period may also be established to allow the banks appropriate time to adapt their systems and processes to comply with the new requirements. Given the uncertainty surrounding the application of provincial consumer protection laws to banks, the Amendments support the argument in favour of exclusivity of federal jurisdiction over banks in relation to consumer protection. The Financial Consumer Agency of Canada will continue to administer the consumer provisions of the Act.
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