Five ways banks could be affected by feds’ budget-implementation bill
Liberals say new legislation will advance ‘the rights and interests of consumers’
The federal government unveiled new legislation on Monday that the ruling Liberals say will improve upon the current protections afforded to bank customers in Canada.
According to the government, the latest legislation, known as Bill C-86, “advances the rights and interests of consumers when dealing with their banks.”
Those rights and interests are being addressed after a March report from the Financial Consumer Agency of Canada detailed a “sharp focus on sales” at Canada’s Big Six banks, which the watchdog warned could increase the risk of violating consumer-protection rules.
Now, the 850-page budget-implementation bill that was tabled by Finance Minister Bill Morneau includes a number of measures that, if passed, could affect the banks all the way from their neighbourhood branch networks to their C-suites. Here’s a look at some of the proposals.
1) Naming and shaming
The chief watchdog for banking customers, the FCAC, has issued 131 decisions over the years, but the name of an offending bank hasn’t been published since 2004, allowing for lenders to remain anonymous when they are taken to task for flouting consumer-protection rules.
For instance, the group’s latest ruling centred on a bank that “failed to provide accurate mortgage payment frequency information in a clear, simple and not misleading manner to its customers as required by the Cost of Borrowing Regulations,” but the bank was never named.
The new budget-implementation legislation, however, proposes amending the Financial Consumer Agency of Canada Act to state that, subject to any regulations, the FCAC commission “shall” make names public, instead of the current wording which gives it the option.
“In making public the nature of a violation,” the bill adds, “the Commissioner may include the reasons for his or her decision, including the relevant facts, analysis and considerations that formed part of the decision.”
At the same time, the budget implementation bill is proposing to seriously crank up the level of fines the FCAC can impose on a bank, increasing it to a maximum of $10 million for a violation from the current limit of $500,000.
2) Closing time
Closing bank branches could become a more arduous — and at times more political — experience for lenders under Bill C-86.
According to the text of the bill, a bank trying to close a retail deposit-taking branch in a “rural area” where no other branch is within 10 kilometres has to give written notice at least six months in advance to all of that branch’s customers, to the public in general “and to the chairperson, mayor, warden, reeve or other similar chief officer of the municipal or local government body or authority for the area in which the branch is located.”
The bank must also publish a notice about the closure in the local newspaper.
3) Whistleblower protections
Bill C-86 could hand regulators and government another tool in uncovering misconduct, as it sets out protections for bankers thinking about turning whistleblower.
According to the legislation, any employee, “who has reasonable grounds to believe that the bank, authorized foreign bank or any person has committed or intends to commit a wrongdoing,” could report this to the proper authorities, which would be required to keep the employee’s identity confidential. In addition, the legislation also proposes that a bank would not be allowed to fire any employee who has blown the whistle.
4) Sales tactics
While the FCAC said it found no “widespread mis-selling” at the banks, it did warn that a sales-heavy environment could increase the possibility of selling products or services to customers that may be incompatible with their needs.
Bill C-86, however, explicitly states that a bank “shall establish and implement policies and procedures to ensure that the products or services in Canada that it offers or sells to a natural person other than for business purposes are appropriate for the person having regard to their circumstances, including their financial needs.”
What’s more, the following section sets out that a financial institution shall make sure how it pays its officers and employees in Canada “does not interfere with the person’s ability to comply” with those aforementioned policies and procedures.
The bill also states that, subject to any regulations, a bank would not be able to provide a person with a financial product or service without first obtaining their “express consent,” which must be asked for “in a manner, and using language, that is clear, simple and not misleading.”
5) Regulatory relief
While Bill C-86 may place a greater regulatory burden on the retail side of the banking business, it could also remove some restrictions as well.
One section of the bill would make it easier for banks to make smaller acquisitions or increase its investments in some businesses by allowing transactions below a certain threshold to proceed without requiring the approval of the Superintendent of Financial Institutions.