Mandatory naming, greater penalties and clarified objectives: the new FCAC provisions

Amendments to the Financial Consumer Agency of Canada Act (FCAC Act) and to the Bank Act—introduced to strengthen the role and increase the powers of the Financial Consumer Agency of Canada (FCAC)—will come into force today, April 30¹. This is the first step towards the implementation of the new consumer protection framework introduced in Bill C-86.

What you need to know

• Mandatory naming and penalties. Coming into force are the FCAC Act amendments increasing the maximum amount of penalties imposed for a violation of the Bank Act consumer provisions and introducing mandatory naming following a finding of a violation by the FCAC.
• New powers. Also coming into force are the Bank Act amendments augmenting the FCAC’s powers, such as the Commissioner’s right to direct a special audit and the Commissioner’s power to direct a bank.
• Still to come. The Bank Act amendments introduced in Bill C-86, which provided for a consolidation and strengthening of the consumer provisions found in the Bank Act, have not been proclaimed into force by this Order in Council.  

Overview of amendments

The amendments proclaimed in force can be categorized as follows:

1. Amendments to the FCAC Act that reinforce FCAC’s purpose as the regulatory body responsible for overseeing financial consumer protection

The introduction of a purpose clause will guide the FCAC’s future decisions and initiatives: “The purpose of this Act is to ensure that financial institutions, external complaints bodies and payment card network operators are supervised by an agency of the Government of Canada so as to contribute to the protection of consumers of financial products and services and the public, including by strengthening the financial literacy of Canadians.”

The FCAC’s objects have been streamlined and reorganized. Noteworthy amendments to the existing FCAC objects are as follows:

• A new provision, which is favourable to the banks, requiring FCAC to balance their duty to protect consumers’ rights with the “need of financial institutions to efficiently manage their business operations.”
• Whereas the existing legislation required the FCAC to monitor and evaluate trends and emerging issues that may have an impact on consumers of financial products or services, the amended provision now also requires the FCAC to make public any such information on trends and emerging issues. This could potentially impact the extent to which FCAC can keep confidential the information it collects.

2. Amendments to the FCAC Act that pertain to the issuance of notice of violations and the imposition of administrative monetary penalties.

The maximum administrative monetary penalty (AMP) amounts that may be imposed by the FCAC for a violation of a consumer provision of the Bank Act have significantly increased. The maximum AMP amount that can imposed for individuals has increased from $50,000 to $1,000,000 and from $500,000 to $10,000,000 for a regulated institution. 

The FCAC must take into consideration two new criteria when establishing the amount of an AMP:

• The duration of the violation, and
• The ability of the person who committed the violation to pay the penalty.

The FCAC Act now provides that the purpose of an AMP is to “promote compliance”. It could be argued that imposing too high of an AMP could be considered “punishment” and therefore not be aligned with the provision’s intent to “promote compliance”.

The Commissioner’s discretion to make public the name of an institution that has committed a violation has been eliminated. The new provision provides that “subject to any regulations, the Commissioner shall make public the nature of the violation, the name of the person who committed it and the amount of the penalty imposed.” As exceptions have not been provided in Regulations, the Commissioner is now required under this provision to always make public the name of the regulated institution who committed a violation.

In addition, a new section was added specifying that in making public the nature of a violation, the Commissioner may include the reasons for his or her decision, including the relevant facts, analysis and considerations that formed part of the decision.

3. Amendments to the FCAC Act of an administrative nature

Although the FCAC had previously submitted annual business plans to the Minister of Finance, a new provision now confirms a legislative requirement to submit thirty days before the end of the fiscal year a business plan to the Minister of Finance for approval.

The FCAC Act was also amended to identify the Bank Act provisions that will be interpreted as “consumer provisions” for the purposes of the Bank Act and the FCAC Act.

4. Amendments to the Bank Act that strengthen the FCAC’s powers

The Commissioner will now be permitted to direct a special audit of a bank if the audit is required to administer the FCAC Act or the consumer provisions of the Bank Act. The FCAC can appoint an accounting firm to carry out the audit and the expenses associated with this audit are to be paid by the bank.

If the Commissioner believes or has reasonable grounds to believe that a bank has failed or will fail to comply with a compliance agreement or a consumer provision of the Bank Act, the Commissioner will be allowed to direct the bank to comply with the compliance agreement or the consumer provisions and to perform any act that in the opinion of the Commissioner is necessary to ensure compliance. The Commissioner may then apply for a court order should the institution fail to comply with the Commissioner’s direction.

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¹ These amendments were introduced in the Budget Implementation Act, 2018, no. 2, Bill C-86 (Bill C-86). The Order in Council is available in the OIC database and will be published in the Canada Gazette at a later date.

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