Bill C-29 Proposes to Overhaul Bank Act Consumer Provisions

On October 25, 2016, Bill C-29, Budget Implementation Act, 2016, No. 2 (the Bill), was introduced in the House of Commons. If passed, the Bill will amend the Bank Act (Canada) (the BA) to (i) respond to a trilogy of Supreme Court cases (referred to as Marcotte) by enhancing arguments that federal jurisdiction is paramount over provincial jurisdiction with respect to products and services of banks and (ii)  consolidate and strengthen consumer protection provisions that apply to banks and authorized foreign banks.

What You Need To Know

The Bill:

• adds a purpose and a paramountcy clause to the BA's existing preamble to enhance arguments that only the federal government may regulate banking products and services;
• consolidates the BA’s consumer provisions, imports certain existing consumer regulations into a new Part XII.2 of the BA and enhances consumer protection;
• sets out principles on which the new consumer provisions are based; and
• implements enhancements to the BA in the areas of corporate governance, business practices, public reporting, disclosure of information and access to basic banking services.

Exclusive Federal Jurisdiction

The Bill proposes to slightly restate a preamble to the BA, and to add a "Purpose" and a "Paramountcy" clause, as follows:

Preamble: "And whereas it is desirable and is in the national interest to provide for clear, comprehensive, exclusive, national standards applicable to banking products and services offered by banks".

Purpose: The purpose of the new consumer regime under the BA is to (a) provide customers and the public with uniform protection on a national level, (b) allow the bank or authorized foreign bank to carry on the business of banking, consistently and efficiently on a national level, and (c) ensure the uniform supervision of bank or authorized foreign banks and enforcement of provisions relating to the protection of customers and the public.

Paramountcy: The new consumer regime under the BA is intended to be paramount to any provision of law or regulation of a province that relates to the protection of consumers or to business practices with respect to consumers.

Taken together, these three elements (along with the movement of numerous consumer provisions from the regulations to the BA itself) enhance arguments that banking products and services are subject only to federal, and not to provincial, regulation.

Consumer Framework

In addition to consolidating existing consumer provisions in the BA and many of its regulations, the new provisions proposed in the Bill enhance consumer protection. A full understanding of changes to the existing regime must await the government’s release of draft regulations. Enhancements in the Bill include:

• the introduction of a cooling off period during which a consumer can cancel an agreement for products or services provided by a bank or authorized foreign bank on an ongoing basis;
• an unfair practices regime, which adds to the tied selling restriction a prohibition against taking advantage of persons who are unable to protect their own interests, and engaging in other conduct that will be set out in regulations; and

• an amendment regime in respect of the terms and conditions of agreements for banking products and services, details of which will be set out in the regulations.

  A number of these new elements may be derived from provincial consumer protection provisions. The proposed changes may represent an effort on the part of the federal government to “occupy the field” in these areas in order to enhance arguments in favour of federal paramountcy.

Principles and Accountability

The new consumer regime proposed by the Bill will be based on the following guiding principles:

• basic banking services should be accessible;
• disclosure should enable an institution’s customers and the public to make informed financial decisions;
• an institution’s customers and the public should be treated fairly;
• complaints processes should be impartial, transparent and responsive; and

• an institution should act responsibly, considering its customers and the public as well as the efficiency of its business operations.

  The proposed amendments to the BA will also enhance the public accountability requirements of banks with equity over $1 billion by requiring those banks to describe (i) the measures taken to be consistent with the principles identified above in its dealings with its customers and the public, (ii) the measures taken to provide products and services to persons facing accessibility, linguistic or literacy challenges, and (iii) consultations undertaken by the bank with its customers and the public relating to existing products and services and the development of new products and services, the identification of trends and emerging issues that may impact customers or the public, and matters in respect of which the bank has received complaints. This required information will be in addition to the requirement to provide information with respect to the contribution of the bank to the Canadian economy and society, which is currently set out in the Public Accountability Statement Regulations (although it is not clear what changes will be made to those existing regulations).

  Banks and authorized foreign banks will also be required to annually make available on their websites (and provide in writing to any person who requests it) information relating to the number and nature of complaints dealt with by designated officers or employees, the average length of time taken to deal with complaints and the number of complaints resolved by that officer or employee to the satisfaction of the persons who made them, in addition to any other information which may be prescribed by regulation.

Corporate Governance

The Bill broadens board oversight of a bank's compliance with consumer provisions. The board must designate a committee of directors to:

• require bank management to establish procedures for complying with the consumer provisions (which is broader than current requirements for procedures to address disclosing information to customers and dealing with complaints);
• review those procedures to determine their appropriateness in ensuring the bank is complying with the consumer provisions; and
• require management to report at least annually to the committee on its application of the procedures and any other activities in relation to the protection of its customers.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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