On September 19th, the Supreme Court of Canada rendered its long-awaited judgement in Marcotte v. Bank of Montreal or “Marcotte” and clarified the constitutional principles governing the application of provincial consumer protection laws to federally regulated banks. At issue in Marcotte was whether the requirements of Quebec’s Consumer Protection Act (CPA) respecting the rules governing disclosure and calculation of consumer borrowing costs apply to foreign exchange conversion fees on transactions charged to credit cards issued by the defendant banks. Essentially, the banks argued that applying the relevant provisions of the CPA to the banks either interfered with the federal government’s exclusive authority under the constitution to regulate banks and banking or frustrated the government’s attempt to provide a national consumer protection regime under the Bank Act. The Court disagreed and held that the provisions of the CPA that were at issue in the case validly applied to the banks.
In Marcotte, the Court had to address a practice relating to disclosure of credit card foreign exchange fees and whether they needed to be included in the annual percentage rate (APR). With respect to the disclosure argument, the Court concluded that the provisions of the CPA did not interfere with the federal power as they did not prevent banks from lending money or converting currency, but only required that the fees be disclosed nor did they interfer with the purpose behind the federal legislation. As for inclusion of the fee in the APR (which would have created a conflict between the federal and provincial legislation) the Court avoided the consititutional issue by holding that in their view the CPA did not require their inclusion in the APR as contended by plaintiffs.
It is interesting to note that the Court stated that the modern “cooperative approach” to federalism favours, where possible, the application of statutes enacted by both levels of government. It could certainly be argued that this view influenced the Court’s conclusions that the provisions of the CPA neither interfered with exclusive federal jurisdiction nor frustrated the purpose of the federal legislation. What then does a cooperative approach to federalism mean for the future of financial sector regulation in Canada and for the federal government’s proposed comprehensive consumer protection code? The decision in Marcotte seems to suggest that a single consumer protection regulator for banks is not an option for Canada. If that is not possible, the next best thing would be to have our provincial and federal governments truly cooperate to ensure that Canada’s regulatory regime remains as strong as ever.
For more information about the Marcotte decision, please see our recent Legal Update by clicking here.