The new enhanced powers for the Financial Consumer Agency of Canada have been underway since April, 2020. The Financial Consumer Agency of Canada (FCAC) is an independent federal regulatory agency. Its mandate is to help protect Canadian consumers and inform them about financial products and services. It’s responsible for enforcing consumer protection legislation and ensuring that federally regulated entities comply with federal regulations.
As of April 30, 2020 there’s been a major shift in the enforcement powers of the FCAC. In this article we’ll look at review the new enforced powers and how they affect Canadians.
Updating the FCAC Mandate
On December 13, 2018, Bill C-86 received royal assent. Bill C-86 is a significant bill because it provides better consumer protection when working with banks and authorized foreign banks. To accomplish this, the powers of the FCAC have been enhanced.
A new section of the FCAC Act helps clarify the mandate of the FCAC. The FCAC’s purpose is to ensure a government agency oversees financial institutions, external complaint bodies, and credit card networks. The main goal is to help enhance the protection of consumers when it comes to financial products and services. In addition, the agency seeks to help improve the financial literacy of Canadians.
It explicitly states that the FCAC must help protect the rights and interests of Canadian consumers of financial products and services. However, there is a slight conflict of interest. The FCAC is also responsible for accounting for the needs of financial institutions to manage their businesses in an efficient manner.
To improve financial literacy, it’s the FCAC’s role to share trends and emerging issues that may affect consumers.
Publically Naming and Shaming Violators
The FCAC Commissioner now has to publically name anyone who commits a violation of any regulation. The Commissioner used to be able to do it at his own discretion, however, that discretion was almost never used. This is no longer an issue with the new rules as they currently stand.
Regulations also outline circumstances where the Commissioner wouldn’t need to make the name of the violator public. When the Commissioner makes the violation public, he or she can disclose why, facts, analysis, and consideration.
The maximum penalty for violations of the Act has increased substantially. The penalties have been upped from $50,000 to $1 million when a natural person did the violation. Penalties increased from $500,000 to $10 million for financial institutions or operators of payment cards.
The criteria used for penalties have been extended. They take the following into consideration:
- Duration of the violation and
- The violator’s ability pay the penalty
- How much harm the violation caused
- History of previous violations is also considered.
The main idea behind the higher penalties is to help deter violators and encourage compliance.
The Right to Audit
The Bank Act now has a new right for a special audit. the Commissioner can ask for an audit to administer the FCAC Act and its provisions for consumers.
The Commissioner has the right to appoint its own firm of accountants for this purpose. The bank being audited has to give the Commissioner the results of the audit. Any expenses related to the audit are also the bank’s responsibility.
The Commissioner also has the power to demand that a bank comply with compliance agreements and consumer provisions. The Commissioner can also make this demand when it feels that the bank will fail to comply with these obligations.
If the bank refuses to comply, the Commissioner may seek help from the courts. The Commissioner can apply for a court order that forces the bank to comply.
How the Enhanced Powers Affect Canadians
The enhanced powers are overall good news for Canadian consumers. The new enhanced powers help hold financial institutions in Canada more accountable to the public. They also provide the Commissioner of the FCAC with enhanced powers. He can implement higher fines and audits to ensure financial institutions comply with the Bank Act.
Although the enhanced powers look good on paper, the jury is still out on whether they will actually help Canadians. We will have a better idea over the coming months to see how these enhanced powers play out.
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