Canada: Is CBA's New Voluntary Code Of Conduct The Golden Rule For Banks Serving Canadians In Their Golden Years?

On July 25, 2019, the Canadian Bankers Association (CBA) released its voluntary Code of Conduct for the Delivery of Banking Services to Seniors (Seniors Code), which was adopted by its member banks. Such voluntary codes of conduct are non-legislated commitments that CBA member banks make to the public, and compliance with these codes is overseen by the Financial Consumer Agency of Canada (FCAC).

The Seniors Code is centred on several principles designed to respond to potential health, mobility, or cognitive changes that may impact the ability of seniors to bank. For the purposes of the Seniors Code, a "senior" refers to an individual in Canada who is 60 years of age or older and who is transacting for non-business purposes. Under the Seniors Code, each CBA member bank is required to designate a member of bank management to promote seniors' interests known as the "Seniors Champion," whose role in the bank is to lead the implementation of the Seniors Code, promote and raise awareness of matters affecting seniors and engage with seniors and subject matter experts and organizations representing seniors.

CBA member banks adopted the Seniors Code upon publication, and the Seniors Champion must be designated by those banks by January 1, 2020. The seven principles of the Seniors Code and the relevant implementation dates are as follows:

Principle 1: Banks will establish and implement appropriate policies, procedures, and processes to support the Seniors Code – January 1, 2021.

Principle 2: Banks will communicate effectively with seniors – January 1, 2021.

Principle 3: Banks will provide appropriate training to their employees and representatives who serve seniors – Training must be scheduled by January 1, 2021 for delivery within the year.

Principle 4: Banks will make appropriate resources available to client-facing employees and representatives to help them understand matters relevant to seniors' banking needs – January 1, 2021.

Principle 5: Banks will endeavor to mitigate potential financial harm to seniors – Immediate.

Principle 6: Banks will take into account market demographics and the needs of seniors when proceeding with branch closures – Immediate.

Principle 7: Banks will publicly disclose the steps they have taken to support the principles set out in the Seniors Code – The reporting required must be published within 135 days of the CBA member bank's financial year-end that falls within 2020.

PARADOX IN ADOPTION: TOO BROAD AND NOT BROAD ENOUGH

Not all CBA member banks (including foreign bank branches) have retail operations that serve senior customers, and the Seniors Code appears overly broad in this regard. It may be completely irrelevant for certain CBA member banks to appoint a Seniors Champion, for example, where the bank's operations do not involve providing services to retail customers. However, if any CBA member bank does not appoint a Seniors Champion, it will not be in compliance with the Seniors Code. No information on how the FCAC will interpret the requirements of the Seniors Code has been released, but hopefully the FCAC will take the view that the Seniors Code does not apply to CBA member banks that only have business customers.

At the same time, not all banks operating in Canada are members of the CBA, including some banks that are members of the Canada Deposit Insurance Corporation and are likely to have seniors as customers of their retail operations in Canada. This means that the Seniors Code is somewhat unevenly adopted: there are some banks that have assumed unnecessary scrutiny by the FCAC and there are other banks providing retail banking services to seniors that are excluded. The latter category also includes some non-CBA member retail deposit takers, such as trust companies, which are excluded from the CBA's purview.

REDUCING COMPLAINTS BY SENIOR BANKING SERVICES CONSUMERS

The release of the Seniors Code coincides with the Ombudsman for Banking Services and Investments' (OBSI) July 18, 2019 release of its first-ever Seniors Report, which records its experience receiving complaints from senior consumers of banking services in Canada from 2017 and 2018. OBSI's Seniors Report indicates that seniors are more likely to complain about banking services than other age groups and that they continue to face issues with day-to-day banking services, as well as with mortgage and investment products. OBSI also identified key barriers for seniors in accessing financial services and difficulties with communication and taking advantage of new technologies and some possible solutions to address these challenges. One such solution proposed by OBSI is the bank agreeing to recognize a "trusted person" identified by a senior consumer to assist them with their financial affairs without the necessity of a formal arrangement such as a power of attorney. In addition, OBSI recommends that banks formalize protections for employees who act in good faith to protect their senior clients through "safe harbour" regulations. These recommendations, however, are not without risk of abuse.

OBSI's Seniors Report followed its February 6, 2019 public response to the request for comment by the FCAC on a draft version of the Seniors Code, which generally recommended a more rules-based approach, such as the division of seniors into additional categories to identify those seniors who may be more at risk of banking difficulties, such as seniors over the age of 75 or 80. In its response, the OBSI also set out specific communication, training and technology strategies to assist banks with the implementation of the principles in the Seniors Code, like formally adopting "trusted person" and "safe harbour" mechanisms. The final version of the Seniors Code did not incorporate OBSI's specific suggestions but, in order to reduce complaints by senior consumers, banks may wish to consider the specific recommendations made by OBSI in its Seniors Report, particularly with respect to communications with seniors and training for bank employees for their interactions with senior consumers.

WORK TO BE DONE BY CBA MEMBER BANKS

When implementing the Seniors Code, CBA member banks are required to take into account applicable accessibility standards. This means that CBA member banks must consider both the substantive requirements of the Seniors Code together with the accessibility standards applicable to their operations in designing their implementation plans for the Seniors Code. In addition, CBA member banks must incorporate the Seniors Code into their regulatory compliance management framework, which will require the banks' careful consideration.

The Seniors Code also requires CBA member banks to integrate the new information for senior consumers and bank employee training and resources with those required under the CBA's Commitment on Powers of Attorney and Joint Deposit Accounts.

ENFORCEMENT OF VOLUNTARY CODES OF CONDUCT

In its news release on the Seniors Code, the FCAC said: "[s]hould FCAC find that a bank has breached a voluntary code, it will take appropriate action as outlined in its Supervision Framework." Under the Financial Consumer Agency of Canada Act (FCAC Act), one of the objects of the FCAC is to monitor the implementation of voluntary codes and the Commissioner of the FCAC is empowered to make any review that he or she considers necessary to monitor compliance with a voluntary code.

If a CBA member bank does not comply with the Seniors Code, the FCAC may ask such bank to enter into a voluntary compliance agreement with the FCAC pursuant to the Bank Act. Breaches of such a compliance agreement are designated as violations under the FCAC Act and may attract administrative monetary penalties in the maximum amount of C$50,000 in the case of a natural person, and C$500,000 in the case of a financial institution.

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