The Financial Consumer Agency of Canada (“FCAC”) published on May 14, 2018 a Report on Best Practices in Financial Consumer Protection (the “Report”). This Report follows an in-depth review by the FCAC of the federal and provincial/territorial financial consumer protection regimes, including by way of consultations between the FCAC and provincial and territorial regulators. The Report’s conclusions are also informed by a review of international guidance including the G-20 High-Level Principles on Financial Consumer Protection.
The Report was produced at the request of the Minister of Finance when the financial consumer protection provisions were removed from the Budget Implementation Act, 2016, No. 2 (Canada) (Bill C-29), and points to what changes to the Bank Act (Canada) and regulations may soon be introduced in order to establish a new Financial Consumer Protection Framework.
The Report outlines the following as best practices for financial consumer protection regimes:
- A regulator is specifically responsible for overseeing financial consumer protection.
- A standalone legal framework establishes clear minimum standards to protect financial consumers.
- The legislation provides for the fair treatment of financial consumers at all stages of their relationship with financial service provider.
- The legislation sets out enforceable principles.
- The legislation requires prominent disclosure of key information.
- The legislation prohibits misleading practices, such as misleading advertising.
- Consumers can access alternative dispute resolution systems.
- Regulators have access to a wide range of enforcement tools to achieve compliance.
- Regulators are transparent with consumers by communicating information about complaints, investigations and enforcement.
- Consumers have access to affordable, independent and impartial redress mechanisms.
- Consumers can access different remedies if financial institutions do not comply with their consumer protection obligations.
In preparing the Report, the FCAC reviewed and benchmarked the federal and provincial/territorial regimes against such best practices, and against each other. The Report notes the following as the areas where there are the most notable disparities among jurisdictions: (1) institutional arrangements (i.e. how the regulator is structured), (2) protection measures afforded to consumers, (3) alternative dispute resolution systems, (4) enforcement powers and (5) redress mechanisms.
Review of Federal Financial Consumer Protection Regime
Based on such review, the Report notes that there is access to a broader range of enforcement tools (including compliance and court orders) and redress remedies under provincial/territorial regimes than under the federal regime. In addition, the Report notes that the provincial/territorial regimes include prohibitions on unfair practices, unlike the federal regime which only prohibits unfair practices such as tied selling and unsolicited services. The Report states that “[s]ome of these elements could be introduced in the federal scheme to further enhance the financial consumer protection framework.”
Review of Provincial/ Territorial Financial Consumer Protection Regimes
The Report notes that most provinces/ territories do not have a single regulator specifically responsible for overseeing financial consumer protection (instead provincial/ territorial regulators tend to be broadly focused on consumer protection, with in some cases, an additional prudential regulator). Furthermore, the provincial/ territorial regulators are “largely reactive, focusing their monitoring and enforcement activities largely on incoming complaints”, unlike the FCAC which takes a more proactive approach, including ongoing supervision.
In this respect, it is noteworthy that Ontario is currently in the process of establishing a new consolidated financial services regulatory authority, the Financial Services Regulatory Authority (FSRA), with a broad financial services regulatory mandate, and that the current Financial Services Commission of Ontario (FSCO) has issued a proposed guideline on the fair treatment of consumers for review.