The Negative Option Billing Regulations (“Regulations”) first released in March 2011 in draft form for public consultation were published in final form in the March 14, 2012 issue of the Canada Gazette Part II. The final version of the Regulations, which are to come into force on August 1, 2012, reflects only minor changes from the draft form released for consultation.
CLICK HERE to view the Regulations.
The Regulations, which have been made pursuant to provisions of the Insurance Companies Act (Canada), the Bank Act (Canada), the Trust and Loan Companies Act (Canada) and the Cooperative Credit Associations Act (Canada), require federally regulated financial institutions (“FRFIs”) to provide certain products and services to consumers on an opt-in basis only and, in the case of certain optional products or services, only where an initial disclosure statement containing prescribed information has been provided to the consumer, orally or in writing.
Under the Regulations, a FRFI is required to obtain a consumer’s express oral or written consent (the opt-in) before providing the consumer with a “primary financial product or service” or an “optional product or service”. These terms are defined in section 1 of the Regulations as follows:
“optional product or service” means a product or service that is offered or provided to a person by an institution, an affiliate that it controls or an agent or representative of the institution or affiliate for an additional fee and is available only with an agreement for a primary financial product or service provided by the institution.
“primary financial product or service” does not include a product or service that is offered or provided by a company or a foreign company as defined in the Insurance Companies Act to insure a risk.
An example of a “primary financial product or service” may be a credit card provided by a bank and an example of an “optional product or service” may be a balance protection insurance product made available by the bank to holders of the credit card.
We expect that the Regulations will be of particular significance to banks and other institutions that offer optional products and services in connection with a credit arrangement.
The Regulations do not provide any new or additional disclosure requirements for a new “primary financial product or service” offered to a consumer, but they do require that FRFIs provide consumers with an initial disclosure statement (orally or in writing) containing the information referred to in paragraphs 6(a) to (d) of the Regulations (or a summary of that information) prior to obtaining the consumer’s consent to receive an “optional product or service”.
The Regulations also require FRFIs to provide consumers with advance notice of the end date for certain types of promotional, preferential, introductory or special offer periods for optional products or services, and to disclose any charges that may be imposed after that date.
It is important to note that the Regulations are considered a “consumer provision” under the Financial Consumer Agency of Canada’s (“FCAC”) new Compliance Framework. Accordingly, any complaints received by FRFIs regarding the Regulations are subject to the “consumer provision” reporting requirements of the new Compliance Framework.
CLICK HERE to read our commentary regarding the FCAC’s new Compliance Framework.