From Susan Munroe,
Your Guide to Canada Online.
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Updated: 06/15/01

Massive legislation reforming government policy on banks, trust companies, credit unions and the insurance industry in Canada finally received Royal Assent in June 2001.

The Act is designed to encourage efficiency and growth in the financial industry, increase international competitiveness and domestic competition, and improve the regulatory environment for the sector.

There are many measures in this legislation which affect Canadians in their day-to-day personal finances, as the government tries to balance the needs and protection of consumers with those of financial service providers. Here are the main consumer elements of the legislation.

Financial Consumer Agency of Canada

The Act establishes the Financial Consumer Agency of Canada (FCAC) to enforce consumer-related provisions of the legislation, to monitor the industry's self-regulatory consumer initiatives, to promote consumer awareness and to answer consumer questions.

Financial Services Ombudsman

The Act establishes a new Canadian Financial Services Ombudsman (CFSO) to handle complaints from consumers and small businesses. The CFSO is independent of both the financial services institutions and of the federal government. Banks are required to join the CFSO.

Improved Access to Financial Services

The legislation improves access to financial services for some Canadians. Banks are required to open accounts for individuals without demanding a minimum deposit or that the individual be employed. Financial institutions are also required to cash government cheques for non-customers, with a minimum form of identification.

Low Cost Accounts

The banks are required to make a low-cost account available to consumers. The banks have already signed an agreement to do this and while the accounts vary, they all provide a maximum monthly fee and provide some in-branch transactions. The banks will regulate this initiative themselves, although the FCAC will monitor it.

Branch Closures

The legislation requires that federal deposit-taking institutions give four months notice of a branch closure and post the notice in the branch. In areas where there is no other financial institution within 10 km (6.2 miles), advance notice will be six months to give rural communities time to come up with alternative solutions.

Good Business Practices

The legislation provides the federal government with more authority to regulate in areas such as disclosure, for example disclosure of bank policies on hold periods for deposits.

The legislation also expands the existing prohibition on tied selling, which forbids an institution from making a customer buy another product to get a loan. The Act forbids making it a condition to buy any product in order to get any other product, not just a loan.

Text of Financial Consumer Agency Act