Building on the federal government's continued commitment to modernize and enhance Canada's financial consumer protection framework (Framework), the Financial Consumer Agency of Canada (FCAC) has released its Report on Best Practices in Financial Consumer Protection (Report). While the Report provides useful insight into the financial consumer protection landscape in Canada, at this time, it remains unclear how the Report's findings will fit into the government's commitment to modernize the Framework or how the best practices will be made actionable.
The mandate that is the subject of the Report dates back to 2013, when the federal government launched a public consultation to seek input on a proposed Framework. Following the consultation, the government introduced Bill C-29, Budget Implementation Act, 2016, No. 2 (Bill C-29) in October 2016. Bill C-29 proposed to modernize the Framework by consolidating existing consumer provisions in the Bank Act (Canada) and incorporating enhanced and targeted consumer protection measures to better respond to Canadians' changing needs. However, in December 2016, the government removed the long-anticipated modernized Framework and related provisions under the Bank Act (Canada) from Bill C-29, in response to the strong opposition from certain senators and some provinces.
Upon removing the proposed Framework from Bill C-29, the federal government requested that the FCAC undertake a review of the legal landscape underlying financial consumer protection regimes at the provincial/territorial, federal and international level. During the first quarter of 2017, the FCAC engaged with provincial and territorial regulators and other key stakeholders to identify the best practices in financial consumer protection in place across the country. The FCAC assessed provincial and territorial consumer protection frameworks, identified the protections afforded to financial consumers, examined the oversight and enforcement tools to monitor compliance, and considered the efficiency, timeliness and equitableness of complaint handling and redress mechanisms. The FCAC reported its findings to the Minister of Finance on May 31, 2017.
On May 15, 2018, the FCAC released the Report's findings to the public. The Report identifies the following 11 best practices that comprise a strong financial consumer framework:
- A regulator is specifically responsible for overseeing financial consumer protection
- A standalone legal framework establishing clear minimum standards to protect financial consumers
- Legislation providing for the fair treatment of financial consumers at all stages of their relationship with financial service providers
- Legislation setting out enforceable principles
- Legislation requiring prominent disclosure of key information
- Legislation prohibiting misleading practices, such as misleading advertising
- Consumers having access to alternative dispute resolution systems
- Legislation providing regulators with the power to compel compliance
- Legislation promoting transparency with consumers
- Consumers having access to affordable, independent and impartial redress mechanisms
- Consumers having access to different remedies in the event of non-compliance by financial institutions.
The executive summary and conclusion sections of the Report provide a concise overview of the 11 best practices listed above and note that the FCAC's findings are intended to inform the work that is being done on a new Framework, though no specifics are given regarding this work.
Prior to the Report being released, Bill C-74, Budget Implementation Act, 2018, No. 1 (Bill C-74) was introduced in March 2018 and proposed legislative changes to various areas in the Canadian financial sector (see our April 2018 Blakes Bulletin: Financial Sector Legislative Reform Continues). However, Bill C-74 did not include any reference to a modernized Framework, comprehensive consumer code or best practices in financial consumer protection. Similarly, the consultation papers released by the federal government leading up to Bill C-74 (Consultation Papers) also did not discuss such issues, but instead simply referred to the ongoing initiatives by the FCAC that culminated in the Report.
Despite the Government of Canada's reaffirmed commitment to developing a comprehensive and modernized Framework, based on the Report, Bill C-74 and the Consultation Papers, it remains unclear how the best practices identified in the Report will be put into action or used to develop such a Framework in Canada.
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