Federal financial consumer protection framework – Introducing a new redress scheme

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Note:  This is the fifth in a series of articles intended to parse the new federal financial consumer protection framework (the “Framework”). To view other articles in the series scroll down to the bottom of this article.

Bill C-86 Bank Act amendments related to the new federal financial consumer protection framework (“the Framework”) introduce the notion of “Redress” under Division 4 of a new Part XII.2.  While brief, the Division represents an important shift in bank obligations where bank customers have suffered financial loss as a result of a breach of a consumer provision.

Reimbursements or credits

Under the new regime (s. 627.997), banks will be required to reimburse their customers or credit their account in circumstances where product or service charges (including fees) or penalties have been collected, in the absence of contractual wording allowing for such collection.  Banks will also be required to reimburse and credit the portion of charges or penalties they collect that exceeds the charge and penalty amounts set out in the agreements. 

A similar reimbursement and credit obligation will be imposed where a charge or penalty is collected in relation to a product or service provided by the bank without a person’s express consent. 

Plus interest

In all of the cases above, banks will have to pay interest on the amounts “overcharged” at the Bank of Canada overnight rate, from the date the charge or penalty is imposed to the date the amount is refunded or credited.

Power to direct redress

Under section 661.1(1), the Commissioner may direct banks to effect the redress described above. 

The introduction of redress provisions in the Bank Act, along with the new powers of direction entrusted in FCAC’s Commissioner, represent important milestones in Canada’s efforts to keep step with many of its international counterparts.

Please check back in a few weeks when we will take a closer look at the regulation-making power, special audits, Commissioner’s directions and whistleblowing.

Federal Financial Consumer Protection Framework Article Series and Related Insights

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