December 17, 2024Calculating...

Fall Economic Statement promises changes to banking, consumer protection, AML and payments

Canada’s 2024 Fall Economic Statement (the Statement) announced key proposed changes to anti-money laundering (AML), banking, consumer protection and payments laws. In our previous bulletins, we discussed Budget 2024 measures, including the introduction of consumer-driven banking legislation and the Budget Implementation Act. In this bulletin, we discuss the newest set of proposed measures relevant to financial services businesses.

What you need to know

  • In banking, the timeline has been set for the launch of open banking in Canada in early 2026, along with corresponding funding to the Financial Consumer Agency of Canada (FCAC) and a commitment to low-cost and no-cost bank accounts.
  • In consumer protection, amendments have been proposed to the payday lending exemption in the Criminal Code to prohibit the sale of credit insurance products, as well as changes to the exemption requiring a minimum term on payday loans of 42 days and for lenders to accept payment in installments.
  • In AML, a set of amendments are proposed that would increase administrative monetary penalty amounts under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), beef up compliance program requirements, and require mandatory enrollment with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) for all reporting entities that are not already registered.
  • In payments, the government is considering legislative measures to compel payment processors to fully pass credit card transaction fee savings on to small businesses.

Open banking

The government announced its open banking framework, known as the Consumer-Driven Banking Framework, in Budget 2024 and passed the Consumer-Driven Banking Act in June 2024. Open banking frameworks allow financial data to be shared between financial institutions and third parties using secure application program interfaces. Such frameworks are already in place in several jurisdictions, including Australia and the United Kingdom.

The Statement announces the government’s intention to launch the framework in early 2026, along with $44.3 million in funding to the FCAC for a consumer awareness campaign and public registry of participating providers.

The Statement also proposes the establishment of a permanent advisory committee to inform the FCAC’s work, as well as legislative powers for the Minister of Finance to designate a provincial or territorial authority to supervise provisions related to the framework.

In consumer banking, the government and FCAC have negotiated modernized low-cost and no-cost account agreements with at least thirteen banks, including Canada’s six largest. The new agreements increase the number of included free monthly debit transactions from 12 to 18 and now include Interac e-transfers. Eligibility for no-cost bank accounts has also been expanded to more designated groups.

Predatory lending

As we noted in our bulletin, “Criminal interest rate reduced to crack down on predatory lending”, changes to Canada’s criminal interest rate take effect on January 1, 2025. The changes lower the criminal interest rate from 60% annual rate (which the government states is equivalent to approximately 48% APR) to 35% APR, while providing exemptions for certain types of commercial and pawnbroking loans.

Building on this change, the government has signalled its intention to amend the payday lending exemption in the Criminal Code to prohibit the sale of credit insurance products in connection with a payday loan. The government also plans to amend the payday lending exemption within the Criminal Code to require a minimum term on payday loans of 42 days, as well as for lenders to accept payment in installments.

Anti-money laundering

The Financial Action Task Force (FATF), an intergovernmental organization that combats money laundering, will conduct its mutual evaluation of Canada in 2025-2026. In response, the government has enhanced AML and anti-terrorist financing (ATF) measures, as we detailed in a previous bulletin, “Canada plans to bring new entities under Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Draft regulations introduced by the government proposed new classes of reporting entities under the PCMLTFA, including factoring companies, cheque-cashing businesses, and financing and leasing entities.

The Statement announces further changes to Canada’s AML and ATF regime by expanding its application to company service providers that can be used to facilitate money laundering and terrorist financing activities, as well as to require mandatory enrollment with FINTRAC for all reporting entities that are not already registered. Proposed changes would also permit FINTRAC to disclose information to support the Office of the Commissioner of Canada Elections to detect and deter illicit financing and foreign interference in Canadian elections.

A new taskforce would also be established for law enforcement and the financial sector to exchange and analyze information relating to high-end money laundering schemes. The taskforce will be modelled after the United Kingdom’s Joint Money Laundering Intelligence Taskforce, which brings together financial institutions, regulatory authorities and law enforcement agencies.

Compliance programs are also targeted by the Statement, with a new requirement for reporting entities to establish and maintain an effective, risk-based and reasonably designed compliance program, as well as increased AMPs for the violation of existing compliance program requirements by re-classifying such violations as “very serious”.

The PCMLTFA and Office of the Superintendent of Financial Institutions Act would also be amended to make FINTRAC a member of the Financial Institutions Supervisory Committee.

Along with the other changes, penalties for non-compliance are also increasing. Proposed changes to the PCMLTFA would increase all individual administrative monetary penalties (AMP) by 40 times the current amounts and enable the refusal or revocation of registration for a money service business with an outstanding AMP. A new criminal offence would also be introduced for the provision of false, misleading or incomplete information by a reporting entity to FINTRAC.

Payments

The Statement proposes to bring into force Sections 6 and 7 of the Payment Card Networks Act (the Payments Act), which deal with the ability to make regulations and the enforcing of conditions. The Payments Act was introduced in 2010 to regulate national payment card networks and the commercial practices of payment card network operators. However, as it currently exists, the Payments Act is effectively an empty shell under which no regulations have yet been introduced.

In October 2024, new interchange rates came into effect, along with amendments to the Code of Conduct for the Payment Card Industry in Canada to provide greater transparency to merchants of fees they are charged to accept payment by payment cards.

The government remains concerned that savings from lower rates are not being passed on to small businesses. To that end, the government is considering legislative measures to compel payment processors to fully pass credit card transaction fee savings on to small businesses—potentially through regulations under the Payments Act.

Next steps

We expect legislative measures to implement the above announcements to be introduced in the coming months.


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.

For permission to republish this or any other publication, contact Janelle Weed.

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