In March 2018, the Financial Consumer Agency of Canada released findings of their review of domestic bank retail sales practices, concluding that banking culture focused on selling products and services increased the risk that consumer interests were not being given proper weight. Following release of these findings, Bill C-86 was introduced and received royal assent in December, introducing sweeping changes to the Bank Act’s consumer protection framework. Below is a summary of some of the key amendments related to selling practices, required disclosures, redress, and complaints that will improve the protection of the consumers dealing with banks.
The Bank Act currently prohibits banks from imposing undue pressure on a person only in relation to tied selling. Bill C-86 introduces a number of new provisions to prevent predatory selling practices by domestic and authorized foreign banks (collectively “Institutions”):
- Institutions cannot impose undue pressure on a person or take advantage of a person at any time, not just in relation to tied selling.
- Institutions must create policies to ensure that products or services offered to individuals for personal use are appropriate for their circumstances and financial need. Remuneration of employees and anyone else engaged in selling products or services on behalf of an Institution must be designed in such a way as to not interfere with the employee’s ability to comply with these policies.
- Officers and employees that offer products or services must receive training with respect to the policies Institutions have adopted to comply with consumer protection provisions.
- Prior to entering into an agreement with a person by mail or through electronic means, Institutions must provide local or toll-free phone number of a resource person who has knowledge about the terms of the agreement and can answer questions the consumer may have.
Under the current Bank Act, many of the disclosure requirements are contained in the Act’s regulations. Bill C-86 moves some of the requirements directly into the Bank Act and introduces some key new disclosures:
- Under the current Bank Act, only certain information related to tied-selling, complaints procedure and deposit accounts is required to be disclosed at an institution’s branches and on their website. Bill C-86 broadens this requirement to include disclosure of any information under the new consumer protection regime.
- Institutions must disclose the fact that they are prohibited from taking advantage or imposing undue pressure on consumers.
- Under the current Bank Act, disclosure statements for renewal of a product or service were only required for mortgages. Bill C-86 introduces required disclosure statements upon renewal of any product or services.
- If an institution offers a promotional, preferential or other special offer on a product or service to an individual for personal use, the Institution it must disclose the interest rate, charges or penalties, cancelation periods, and the individual’s rights and obligations in relation to the product or service after the offer expires.
- For deposit accounts, credit cards and lines of credit provided to individuals for personal use, Bill C-86 requires Institutions to create a system that send an electronic alert to the individual if their account or available credit falls below an amount the individual communicates to the institution, or $100 if the individual does not specify the amount. Institutions must disclose this policy in applications and initial disclosure statements for these products.
- Institutions will be required to disclose any voluntary codes of conduct they have adopted at each branch and on their website.
- Bill C-86 introduces a provision that requires Institutions to disclose prescribed information prior to entering into credit agreements with persons other than individuals. Institutions will need to closely monitor new regulations that will be introduced in the coming years to comply with disclosure of information to customers other than individuals.
Redress and Complaints
Bill C-86 introduces important provisions related to redress and complaints procedures:
- Institutions are required to establish complaints procedures that are satisfactory to the Commissioner of the Financial Consumer Agency of Canada, designate one person in Canada to be responsible for implementing these procedures and designate one or more persons to receive and deal with complaints.
- Institutions must keep records of complaints containing prescribed information for at least seven years.
- Institutions must provide quarterly reports to the Commissioner regarding complaints received and annually disclose the number and nature of complaints dealt with, average length of time taken to deal with complaints, number of complaints resolved and other prescribed information on their websites.
- Institutions are prohibited from collecting a charge or penalty in relation to a product or service unless that chare or penalty was provided for in the credit agreement. If an institution collects a charge or penalty in violation of this requirement, they are have an obligation to refund the amount back to the customer with interest. Institutions will need to review agreements for products and services to ensure that appropriate charges and penalties are provided for.
In addition to new requirements listed above, Bill C-86 introduces a number of other important requirements, including new whistleblowing procedures, amendments to the Financial Consumer Agency of Canada Act, and corporate governance amendments. Banks operating in Canada will need to familiarize themselves with the new requirements imposed by Bill C-86 and any regulations introduced in the future as a result in order to stay compliant with the new consumer protection regime.