The Canadian Bank Reform and The Consumer

“Bill C-8 an act to establish the Financial Consumer Agency of Canada and to amend certain Acts in relation to financial institutions”

First Session, Thirty-seventh Parliament,

49-50 Elizabeth II, 2001

House of Commons of Canada

In order to reform government policy on banks, the Canadian federal government has reintroduced massive legislation, credit unions, trust companies and the insurance industry. An earlier bill was abolished on the order paper when election 2000 was called. There is discussion on whether or not this act has been good for the country, the following will prove that the positive effects overrule those that may be negative.

Ever since 1996 when the Mackay Task Force on the future of the financial services industry in Canada started work, Bill C-8 has been under construction. The 800-page bill is designed to encourage efficiency and growth in the financial industry, increase international as well as domestic competition, and improved the regulatory environment for the sector.

This bill contains many measures which affect Canadians in our day-to-day personal finances. As the government balances the need for protection of the consumers as well as the financial service providers, 6 main consumer elements come forward in the legislation.

Financial Consumer Agency. FCAC, the Financial Consumer Agency of Canada, would be forced by Legislative act to provide 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 Legislative Act would establish a new CFSO (Canadian Financial Services Ombudsman) to handle any complaints received from small businesses and their consumers. Being independent of both the financial services institutions and of the federal government the CFSO would have many liberties. Banks would be required to join the CFSO.

Improved Access to Financial Services. The legislation would improve access to financial services for some Canadians. Banks. The banks would be in turn required to open accounts for individuals without demanding the normal minimum deposit or enforce that the individual must be employed. Non- customers would be granted the right to cash their government checks at the financial institutions with a minimum form of identification.

Low Cost Accounts. Low cost account would be available through the banks for the customers. An agreement do to this has already been signed, and although the costs of each will vary, they all provide a maximum monthly fee and many in-branch transactions. Although it will be monitored by the FCAC the banks will be regulating these themselves,

Branch Closures. The bill would also require that federal deposit-taking institutions to 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 bill provides the federal government with more authority to regulate in areas such as disclosure. For example, the government is working on regulations to cover the disclosure of risks associated with index-linked deposits and also disclosure of bank policies on hold periods for deposits.

The bank reform would also expand the existing restrictions on tied selling, which forbids an institution from making a customer invest in another product to receive a loan. The new Act would forbid making it a condition to buy any product in order to get any other product, not just a loan. In taking part in this act, not only will the Canadian citizens be profiting with many new liberties when dealing with money, but will be able to profit greatly, and acquire much less burden from Canadian banks.