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Consumer Banking Laws – Know Your Banking Rights

Did you know Canada has specific banking laws in place to protect you in your dealings with the bank? These are known as consumer banking laws. These laws were updated on June 30, 2022, to ensure that Canadian banks are held to a high standard in regard to how they interact with customers. 

These improvements are part of Canada’s Financial Consumer Protection Framework, which includes many new and enhanced protections to help Canadians better manage their finances. 

This article provides information on what consumer banking laws are, who is responsible for ensuring the banks adhere to these laws, and how the new protections for bank customers might affect you. 

Consumer Banking Laws

According to federal laws and regulations, there are several consumer protections that Canadian banks must adhere to, including the right to:  

  • Open a personal account at any bank with the proper ID
  • Cash of government cheque for free at any bank with the proper ID
  • Get clear and simple information that isn’t misleading about products and services
  • Get products and services for which you provide your consent 
  • Have issues resolved through a bank’s complaint-handling process 

On June 30, 2022, this list was updated with new and enhanced protections to improve interactions between banks and their customers. These updates apply to banks, authorized foreign banks, and federal credit unions. 

The Financial Consumer Agency of Canada (FCAC) 

The federal agency, called the Financial Consumer Agency of Canada (FCAC), is the group responsible for getting the new protections and enhancements implemented. The FCAC was established in 2001 to protect the rights and interests of Canadian consumers of financial products and services. It is also responsible for supervising federally regulated entities, including regulated banks, to ensure compliance with consumer protection measures. The FCAC also has the goal of improving the financial literacy of Canadians through a variety of online information and tools.

Work on the new and updated consumer protection laws started in 2018 when the Government of Canada accepted legislation to introduce a new Financial Consumer Protection Law into the Bank Act. The Bank Act is the primary piece of legislation regulating banks in Canada. The Bank Act is governed by the Office of the Superintendent of Financial Institutions (OSFI), and the Financial Consumer Agency of Canada (FCAC). 

Today, these new laws are in full effect helping to protect Canadians and improve the overall banking experience. For a full list of the new and enhanced protections, you can visit the Government of Canada website.  

New Protections for Bank Customers 

Let’s dig into some of the new protections that may help improve your banking experience and your personal finances. 

Banks must provide customers with more information 

Banks are now required to provide additional information to help inform their customers’ day-to-day financial decision-making. For instance, banks now have to send you electronic alerts in two specific situations: 

  • When the balance in your chequing or savings account falls below $100 or an amount you’ve set. 
  • When the available credit on your credit card or line of credit dips below $100 or an amount you’ve set. 

The goal of this change is to make you more aware of when you’re getting close to going into overdraft or exceeding your credit limit and to help you avoid any associated fees.   

You don’t have to sign up to receive these alerts, banks automatically have to participate.  However, you can choose to opt-out at any time. 

Banks must provide advanced notice for renewals 

Banks are now required to provide advance notice for the renewal of products and services. This new protection also applies to any automatic rollover or promotional offer that is set to expire. 

For instance, if you have a credit card with a promotional rate of 1.5% which is set to increase to 29.9%, your bank or credit card provider has to send you a reminder five days before the promotion ends. This way if you’re carrying a balance you can try to pay off your credit card before the rate goes up. 

Higher standards for bank sales practices

Banks are now being held to a higher standard when it comes to their sales practices. As an example, a bank should only offer your products and services that fit your financial needs rather than pushing a product or service because it will lead to a commission or bonus. 

The new and enhanced consumer banking laws also provide broader protections against the use of false or misleading information. The FCAC has the power to hand out fines to a bank that uses misleading information in any of its communications. 

Improved procedures for dealing with customer complaints

Before June 30, 2022, if you submitted a complaint to your bank, they had 90 days to resolve the issue. This timeframe has now been shortened to 56 days. Banks are also required to provide written notice to acknowledge when they receive your complaint and have to be transparent about the procedures they’re using to deal with your complaint.

Increased limit for cashing a Government of Canada cheque

Previously, you had the right to walk into any bank with a government cheque in hand and cash it for free as long as it was for $1,500 or less. Now, you can cash a government cheque up to $1,750 with acceptable ID. 

Supporting whistleblowing among bank employees 

New protections also encourage bank employees to speak up when they see any wrongdoings. Banks must now have a whistleblowing program for employees that prohibits the bank from taking action against any employee who reports an issue. In other words, banks can’t fire or demote an employee just for speaking up when they see a problem. 

Consumer Protection Act

In addition to federal banking legislation, there is also provincial and territorial legislation in place to protect consumers against unfair business practices. For example, in Alberta, the Consumer Protection Act outlines consumer rights (e.g. the right to be free from high-pressure sales tactics), as well as the rules businesses must follow to protect the consumer. It also provides direction on what consumers can do if they are harmed. 

How to File a Complaint 

Federally regulated financial institutions are required to have a procedure in place to handle customer complaints. If you would like to file a complaint against your financial institution, you can follow these steps:  

  1. Speak to a representative. Ask to speak to a representative at your financial institution about your complaint. This can be a customer service rep or you can use an online chat function. Explain the problem, provide proof of the issue, and see if you can come to a resolution.  
  2. Contact your financial institution’s complaint-handling department. If you can’t come to a resolution, your next step is to deal with the financial institutions complaint-handling department. If you don’t find a resolution within 56 days (maximum amount of time to deal with a complaint) or you are not satisfied with the resolution, you can then escalate your complaint. 
  3. Escalate your complaint. If your complaint is directed at a bank, you can escalate it to the external complaints body (ECB) associated with the bank. Banks must be a member of an ECB. 

Depending on the specific details of your complaint, you might have to contact your provincial or territorial regulator.

Consumer Banking Law Improvements 

Consumer banking laws are in place to protect consumers in their interactions with banks and other financial institutions. The new protection and enhancements help to ensure that banks are treating customers fairly and providing enough information for you to make an informed decision. The new electronic alerts and the requirement to provide advanced notice when a product is up for renewal can help to make you more aware of your day-to-day financial situation. 

Need Help With Your Debt? Contact us Today

If you have questions about your finances or you’re struggling with a significant amount of debt and you need help, start by reaching out to a Licensed Insolvency Trustee. At Allan Marshall and Associates, you can book a risk-free 20 minute call with a financial administrator to discuss your debt and possible debt management solutions. Give us a call at 1-888-371-8900 or reach out online

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Mark Marshall BBA, C.I.R.P, L.I.T

Mark has been working in the Insolvency field since graduating from the University of New Brunswick with a degree in Business Administration (BBA). In 2012 Mark received his Chartered Insolvency & Restructuring Professional (CIRP) designation and attained his license as a Licensed Insolvency Trustee (LIT) in 2013.