Back in December 2013, the Federal Government launched a comprehensive review of the consumer protection rules that apply to banks and other federally regulated deposit-taking institutions.  The review was kicked off with the publication of a consultation paper listing possible enhancements to the current Consumer Code.  The public was invited to comment on the paper until February 28, 2014.  This was to be followed by a series of town hall meetings across Canada where individual consumers were invited to meet directly with the responsible Minister to express their views on the proposals.  The most recent of these meetings was held last April.  Therefore, it would appear that a decision by the federal government on the new Consumer Code is nearing.  Depending on the direction that the Government choses to take, the new Code may have significant implications for both banks and consumers.

Why now?

It is certainly true that the Conservative Government of Prime Minister Harper has had a long-standing interest in consumer protection issues.  Since the Government took office in 2006, it has introduced a number of targeted measures to enhance consumer protection in the financial services sector.  However, the timing of the comprehensive review also coincides an appeal now before the Supreme Court of Canada of a decision of the Quebec Court of Appeal.  The Court’s decision in the case of Bank of Montreal, et al. v. Réal Marcotte, et al has the potential to significantly complicate consumer protection regulation in Canada.  The case deals with which level of government has the authority to regulate the consumer protection with respect to banks; the federal Government or the provinces.  While the Federal Government has constitutional authority over “banks and banking”, the Quebec Court of Appeal ruled that provincial law could apply, certainly in the face of what it found to be an incomplete federal regime.

Where are we heading?

It remains to be seen whether the development of a new “comprehensive” federal Consumer Code will keep the provinces at bay.  That will depend on the decision of the Supreme Court.  However, regardless of which way the Court goes, given the energy that the Federal Government has put in to the development of a new Consumer Code, change now seems inevitable.  

In that regard, two of the Government’s proposal should be watched.  The consultation paper clearly indicates that the Government favours adopting a set of principles rather than rules.  In particular, the paper asked for comment on the appropriate standard of responsibility for the banks.  The paper hints that a “fair dealing” standard is being considered.  Furthermore, the paper asks whether the consumer protection agency, the Financial Consumer Agency of Canada, needs more powers to better supervise and enforce consumer protection measures.  Taken together, these two changes could mark a significant change in the consumer protection landscape.  To date, Canada has relied on a rules-based approach with relatively gentle enforcement and no consumer redress mechanism (although a bank’s willingness to provide compensation may have played a roll in determining the size of some penalties in the past).  If the Government heads in the direction that has been suggested, both the banks and consumers will have to get used to this new approach.