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Canada Introduces New and Enhanced Financial Regulations to Protect Bank Customers

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OTTAWA - In a bid to safeguard the interests of Canadians, the federal government has introduced a new Financial Consumer Protection Framework, which took effect on June 30, 2022. The framework is aimed at enhancing consumer protections for bank customers and strengthening oversight of financial institutions.

Key Features of the New Regulations

  • Banks are required to provide additional and timely information to help customers make informed decisions, including:
    • Electronic alerts
    • Advance notice for product and service renewals
    • Separate agreements for optional products and services
  • Higher standards for bank sales practices:
    • Lenders must offer or sell products and services that are appropriate for a customer’s financial needs
    • Express consent is required from customers before offering any new products or services
  • Broader protections against false or misleading information and undue pressure
  • Effective and timely complaints handling processes

Additional Measures to Enhance Consumer Protection

  • Increased limit for cashing Government of Canada cheques
  • Whistleblowing program established to allow bank employees to report any wrongdoing without fear of retaliation

Background and Consultations

The new framework was introduced following extensive consultations with stakeholders across Canada. It is designed to address issues raised by the Financial Consumer Agency of Canada (FCAC) in its reviews of banks, which highlighted key areas where consumers could be better protected and where oversight could be strengthened.

Powers Granted to FCAC

Under the new powers granted to FCAC, the agency can:

  • Impose penalties of up to $10 million on banks for violating their legal obligations
  • Direct banks to take actions to comply with their legal obligations or undergo independent audits

Conclusion

The Financial Consumer Protection Framework is a major step forward in protecting the rights and interests of Canadian bank customers. It demonstrates the government’s commitment to ensuring that financial institutions operate fairly and transparently, and that consumers are treated with respect and dignity.