Torys on Budget 2025: impact on financial consumers

The media has mainly focused on ambitious plans in Budget 2025 (the Budget) to invest in Canada’s infrastructure and strengthen economic productivity, resilience and sovereignty. However, a closer look reveals the federal government’s intent to move on several consumer-focused measures.

Background

In June 2022, the new Bank Act consumer protection framework (the Framework) came into force. The Framework was subsequently amended in 2023 to allow for the existence of a single external complaints body. In March 2026, the Framework will again be amended to impose limitations on the ability of a bank to charge non-sufficient funds (NSF) fees for personal deposit accounts. Although important, these amendments were discrete.

Budget 2025 proposes several additional measures impacting the Framework, including Bank Act amendments, new codes of conduct and “explorations” or “studies” that will likely result in the imposition of additional requirements on regulated financial institutions. The measures focus on three objectives, which we explore in this bulletin: (1) improving Canadians’ interactions with banks by tackling fees, access to funds, and affordability; (2) improving competition; and (3) reducing the incidence of fraud.

Improving Canadians’ interactions with their banks

Tackling banking fees

The government’s plan to improve the affordability of financial services includes several new measures.  For some of these measures, the government has already committed to amend regulations. In other instances, the promise of “exploration” or “working with the banks” implies that there is still room for discussion as to how best to address the government’s concerns.

The government has committed to amending the Bank Act or introducing regulations to:

• prohibit the imposition of transfer fees on investment and registered accounts, as well as require such transfers to be timely, with clear presentation of information on the process and lack of fees; and
• prohibit certain account switching or closure fees from the time the bank gives notice of its intent to close a branch until 12 months following branch closure. 

With respect to commitments to further study the imposition of fees, the government has requested that the Financial Consumer Agency of Canada (the FCAC) prepare a report on the structure, level and transparency of fees charged by Canadian banks. This report would likely encompass the many fee-related commitments in Budget 2025, such as:

• improving the transparency of cross-border transfer fees, including foreign exchange costs; and
• reviewing Interac e-Transfer and ATM fees as part of a general review of fees charged by banks. With respect to this review, the federal government has not committed to amend the Bank Act as they have done with NSF fees, but has stated that it will use "every tool and agency at [its] disposal to address any unjustified fees and pain points for Canadians”. Such tools include codes of conduct or public commitments such as the recently-updated low-cost account commitment, which offers more debit transactions for consumers for no more than $4 per month or at no cost for certain groups.

Budget 2025 also introduces the next phase of open banking, with a commitment to extend the open banking framework to include payment initiation by mid-2027. Oversight of the Consumer-Driven Banking Act will also shift from the FCAC to the Bank of Canada, building on the Bank of Canada’s existing oversight of payment service providers under the Retail Payment Activities Act.

Improving access to funds

To keep pace with cost-of-living increases and technological advances, the government announced the following Bank Act amendments focused on the timing of access to funds and cheque hold periods:

• Increasing the amount immediately available from deposited cheques from $100 to $150 and removing the timing distinction between funds deposited in person and via other means.
• Reducing the number of days that banks may hold cheque funds and raising the value threshold to $1,500 (below which shorter cheque hold periods will apply). This change is aligned with the upcoming implementation of the Real Time Rail (RTR) payment system, which Budget 2025 states will occur in 2026. As funds transferred or payments made through the RTR are irrevocable and settled in real-time, the risks for financial institutions of providing provisional funds are thereby reduced. As a related measure, Budget 2025 sets out the government’s intent to introduce new requirements for banks to investigate and resolve transfers accidentally sent to the wrong recipient.

Development of two new codes of conduct

Policymakers increasingly rely on codes of conduct to address a panoply of issues. Budget 2025 maintains that trend with the introduction of two new codes: 

• a code of conduct to strengthen smaller financial institutions’ access to distribution channels for brokered deposits; and
• a code of conduct for the prevention of economic abuse, which will set clear expectations for how banks can identify, prevent and respond to economic abuse. This measure is expected to benefit groups most affected by economic abuse, including women, lower-income households, Indigenous communities and racialized Canadians.

These two new codes of conduct will be added to the six voluntary codes of conduct and five public commitments that have been adopted by the banking industry.

Banks’ compliance with the new codes of conduct will be overseen by the FCAC, which is mandated to promote the adoption of the necessary policies and procedures to implement such codes. Although the FCAC does not have the authority to impose penalties with respect to breaches of such codes, it can—and has in the past—issued notices of non-compliance when regulated entities that have adopted codes of conduct or public commitments fail to comply with their obligations thereunder. 

Industry stakeholders should not underestimate the amount of effort, costs and time required to ensure compliance with these codes as they will likely necessitate system changes, staff training and amendments to internal policies and procedures. 

Fraud reduction

Lastly, Budget 2025 introduced the first “whole-of-government National Anti-Fraud Strategy” to develop a cross-sectoral approach to protect Canadians from fraud, including the creation of a new Financial Crimes Agency to act as Canada’s lead enforcement agency on complex financial crimes. In addition to various measures addressing money laundering, the government is also planning to amend the Bank Act to introduce several new requirements targeting fraud. The measures will range from requiring banks to have policies and procedures to address consumer-targeted fraud to modifying product offerings to permit consumers to disable features that they do not need.

Banks will also be required to report data on consumer-targeted fraud to the FCAC, with specific data points to be prescribed in regulation.

What’s next

The federal government states that Budget 2025 is only the “first phase of a plan to foster greater competition, innovation, and efficiency in the Canadian financial sector”. Financial institutions should monitor future developments as the regulatory landscape continues to evolve.