On February 12, 2009, some of the long awaited regulations implementing certain consumer protection provisions of “Bill C-37”, formally known as An Act to amend the law governing financial institutions and provide for related and consequential amendments, S.C. 2007, c.6 (the “Act”) came into force. These regulations provide the details of the changes identified in the 2006 Government White Paper to improve disclosure as a foundational pillar towards enhancing the interests of consumers.
Several of the regulations include increasing disclosure at “points of service”, now a defined term, which means physical locations in Canada where institutions carry on business with the public or open or initiate retail deposit accounts through natural persons. In addition, disclosure is now required on websites from which institutions offer products and services. Many of the regulations primarily affect disclosure requirements for banks, authorized foreign banks, retail associations, and trust and loan companies (each an “Affected Financial Institutions”) in the following areas:
- Disclosure of Interest: Affected Financial Institutions are now required to display general notices at points of service and on websites outlining the rate of interest applicable to a deposit account and how the amount of interest paid is to be calculated. The previous requirement to provide specific fixed term deposit disclosure is repealed.
- Disclosure of Charges: Affected Financial Institutions must display general notices at points of service and on websites outlining the charges applicable to personal deposit accounts and services in respect of deposit accounts. Points of service and websites must also maintain a list of charges applicable to deposit accounts.
- Disclosure on Account Opening by Telephone Request: Affected Financial Institutions will now be deemed to have met their disclosure requirements on account opening by telephone request on the fifth day after the postmark date on required materials mailed to consumers.
- Disclosure of Complaint Handling Procedures: Affected Financial Institutions must make available to consumers written materials outlining the current complaints procedures and availability to contact the Financial Consumer Agency of Canada (“FCAC”) by post or website. Written materials may be in the form of a brochure, statement of account or written statement already containing information statutorily to be disclosed, or in the form of a separate document.
- Disclosure of Public Accountability Statements: In addition to previous disclosure requirements, public accountability statements prepared by banks, insurance companies, and trust and loan companies must include information on branches and other facilities where products or services are offered, and must be posted on websites.
- Disclosure Addressing Access to Basic Banking Services: A bank’s procedures governing retail account openings and cashing certain Government of Canada cheques, namely materials relating to personal identification requirements, must be available to consumers at points of service and on websites along with materials outlining the complaints procedures and availability to contact the FCAC, by post or website.
- Disclosure of Deposit Restrictions on Authorized Foreign Banks: Notices of deposit restrictions must be prominently displayed at points of service and on websites.
In these unstable economic times, increased public and media attention have been directed at the consumer and retail banking segments. In addition, case law developments relating to disclosure to consumers continue to increase. Financial institutions and their competitors should be mindful that these regulations may become another touchstone drawing attention to the industry and its provision of financial services to consumers.