Order Fixing June 30, 2022 as the Day on Which Certain Provisions of that Act Come into Force: SI/2021-42

Canada Gazette, Part II, Volume 155, Number 17

Registration
SI/2021-42 August 18, 2021

BUDGET IMPLEMENTATION ACT, 2018, NO. 2

Order Fixing June 30, 2022 as the Day on Which Certain Provisions of that Act Come into Force

P.C. 2021-804 August 4, 2021

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 351(1) of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, fixes June 30, 2022 as the day on which sections 315 to 330 and 333 to 335 and subsection 336(2) of that Act come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

This Order in Council, pursuant to subsection 351(1) of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, fixes June 30, 2022, as the day on which sections 315 to 330 and 333 to 335, and subsection 336(2) of that Act, come into force to implement the new Financial Consumer Protection Framework (the Framework). The new Framework amends the Bank Act.

Objective

The purpose of this Order is to bring into force the provisions of the new Financial Consumer Protection Framework found in the Bank Act. The amendments focus on requiring banks to have internal business practices to further strengthen outcomes for consumers, and aim to further empower and protect consumers in their dealings with their banks.

Background

In 2018, the Financial Consumer Agency of Canada (FCAC) published two reports that highlighted key areas where regulatory oversight could be strengthened and bank consumers better protected. The first was an assessment of best practices in provincial and territorial consumer protection regimes in the Report on Best Practices in Financial Consumer Protection. The second was a review of bank sales practices in the Domestic Bank Retail Sales Practices Review.

To address the issues raised in the FCAC reports, the Government introduced, in Budget Implementation Act, 2018, No. 2, legislative amendments to continue to advance consumers' rights and interests when dealing with their banks. These amendments did not come into force upon royal assent to allow the FCAC and industry time to prepare for implementation, and for any necessary supporting regulations to be developed.

There were two main components to the legislative amendments that were made to the Bank Act and to the Financial Consumer Agency of Canada Act.

The first component provides the FCAC with strengthened powers and an improved mandate to implement supervisory best practices. These changes to the Financial Consumer Agency of Canada Act and the Bank Act were brought into force on April 30, 2020.

The second puts in place a new Financial Consumer Protection Framework. To create the new Framework, key elements of the current legislative and regulatory framework related to consumer protection were incorporated into the new Bank Act chapter, entitled “Dealings with Customers and the Public,” and over 60 new or enhanced measures were developed in consultation with stakeholders. These amendments help to strengthen bank practices to improve outcomes for consumers and further empower and protect consumers in their dealings with their banks.

These legislative amendments (sections 315 to 330 and 333 to 335 and subsection 336(2) of the Budget Implementation Act, 2018, No. 2) could only be brought into force following the development of supporting regulations, and with a sufficient timeline to allow industry to make the necessary systems and policy changes to meet the new requirements. The Financial Consumer Protection Framework Regulations are set to come into force at the same time as these provisions.

Implications

This Order fixes June 30, 2022, as the day on which amendments to the Bank Act to create a new Financial Consumer Protection Framework will come into force.

The new Framework will strengthen outcomes for consumers by requiring banks to improve internal business practices, including by

• designating a committee of their board of directors to oversee banks' obligations towards their customers so that boards have a clear line of sight on their bank's consumer protection responsibilities;
• having policies and procedures to ensure consumers' financial needs and circumstances are taken into account when selling banking products and services; and
• setting up a whistleblowing program, including prohibiting retaliation against employees who report wrongdoings, and keeping their identity confidential.

The measures also further empower and protect consumers, including by

• requiring banks to provide electronic alerts to help consumers manage fees;
• prohibiting banks from applying undue pressure, providing misleading information, and taking advantage of consumers so that consumers are treated fairly; and
• improving the complaints handling systems by requiring banks to have their complaint-handling policies and procedures approved by the Commissioner, and by requiring external complaints handling bodies to publish the rationale for their recommendations.

The consolidation and streamlining of the existing legislative and regulatory requirements uphold existing requirements on banks. These help to ensure that banks engage in responsible business conduct, provide complaints handling services to consumers, provide access to basic banking services, and disclose key product information to consumers.

Examples of the existing requirements that have been maintained include requirements on banks to

• permit consumers to cancel products and services;
• obtain a consumer's express consent before they provide a product or service;
• open accounts for consumers who meet the minimum identification requirements;
• have complaint-handling processes and to be a member of an external complaints handling body; and
• provide key information about products and services to consumers, so they can make informed financial decisions.

Consultations

Budget 2018 proposed to introduce legislation that would strengthen FCAC's tools and mandate and continue to advance consumers' rights and interests when dealing with their banks.

Prior to Budget 2018, the FCAC and the Department of Finance (the Department) together met with regulators and government officials from the Financial Conduct Authority in the United Kingdom and the Bank of Ireland to learn more about international approaches to financial consumer protection.

These consultations helped to inform the development of the legislative amendments. For example, the new requirement on banks to provide electronic alerts to help manage consumer fees was inspired by a similar requirement in the United Kingdom that demonstrated successful outcomes. Other new requirements, such as the general prohibition against providing misleading information, and the new requirement for banks to have policies and procedures to ensure they offer or sell products or services that are appropriate for a consumer, given their financial needs and circumstances, were inspired by similar provisions in these jurisdictions.

Following the Budget 2018 announcement, the Department of Finance undertook consultations on the proposals prior to legislative amendments being introduced in the Budget Implementation Act, 2018, No. 2. Department officials met with over 100 representatives from provinces and territories, consumer groups, banks, and external complaints bodies.

The proposals were seen as significantly improving protections for bank consumers. One province expressed concerns that since elements of the federal legislation differs from provincial requirements, this could create challenges for consumers. The Government has publicly stated its commitment to ensuring that consumers would continue to benefit from provincial protections, and gain new bank-specific protections under federal law. The new legislation does not affect the provinces' ability to regulate in the area of consumer protection.

The legislative amendments require supporting regulations to be brought into force. The Financial Consumer Protection Framework Regulations were broadly supported by stakeholders and seen as contributing to improved protections for bank consumers. The Department of Finance consulted the representatives from provinces and territories, consumer groups, banks and external complaints bodies on the regulatory amendments.

The Department of Finance also consulted on the coming-into-force date of the new Framework.

Banks advised that they will need to undertake operational and information technology (IT) systems changes that are widespread, complex, and that affect multiple core systems. They indicated that there are specific periods of time within which they can undertake the required IT system changes, and that a number of these periods are already slated to be used for other required changes. As a result, banks requested a multi-year implementation timeline following completion of the Regulations. The FCAC also requested time to make IT systems changes to be ready to collect new complaints data from banks.

These considerations were balanced with other stakeholder needs. External complaints bodies advised they could be ready to make operational changes on a fairly quick timeline. Further, consumer groups expressed a strong preference to see the Framework in force as soon as possible, as they view the new provisions as a positive step forward.

In balancing these views, the Department determined that a June 30, 2022, coming-into-force date for the new Framework would be appropriate. This aligns with the coming-into-force date for the Financial Consumer Protection Framework Regulations and provides industry and the FCAC with sufficient time to prepare for implementation. This coming-into-force date takes into account delays to implementation due to the COVID-19 pandemic, while still balancing the need to implement the new requirements as quickly as possible to help ensure financial consumers are protected.

Contact

Erin O'Brien
Director General
Financial Services Division
Financial Sector Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Telephone: 613‑796‑6157
Email: erin.obrien@fin.gc.ca