TODAY is the last day (until Friday, 28 February 2014 at 5 p.m. eastern time) to tell the federal government what you think about banking in Canada. You will be commenting on the federal government’s document Canada’s Financial Consumer Protection Framework: Consultation Paper , released 3 December 2013.
This consultation asks whether Canada should adopt a financial consumer code that banks and other federal financial institutions will have to follow in serving their customers. It’s an important opportunity for Canadian consumers to improve consumer protection in financial services in Canada. To assist, PIAC has prepared a short description of some banking codes in other countries (below) that may assist you in preparing your comment to the government. Please take the time to make a comment by 28 February 2014 to improve banking for consumers in Canada!
Deciphering Codes: Banking codes and Consumer Rights
In many countries, there are consumer codes that protect people while banking. These can vary, but most at least have guidelines for the financial institutions to follow. Canada is actually somewhat unique in that it has no real rulebook for consumer guidelines. Instead, some ad hoc consumer protection rules have been added to the Bank Act, Canada’s original governing document for banking.
The act’s original purpose when it was introduced in 1871 was to make sure that the banks don’t fail; for example, it dictates the money they’re required to have available and what kind of business the bank can engage in. Later, when consumers began running into problems, the act had consumer rights inserted. There are consumer protections in the act, but many countries have already gone the extra mile for the people who use banking daily.
While Canada has a few hard-line rules in place, other countries over the last 10-15 years have created comprehensive banking codes of conduct which serve the consumers and ensure their best interest is looked after. They have put rules in place that are specifically there to protect consumers, and especially protect seniors and other vulnerable populations.
Despite the common goal of protecting consumers in banking, several countries around the world have taken different approaches to the question of how to structure their banking code.
For instance, the Netherlands has a “Banking Code” designed to be flexible to fit into the larger European banking regulatory regime. The Dutch code works under the principle of ‘comply or explain’ meaning while the code is broadly applied, banks can satisfy the code with an alternative solution and a reasonable explanation for not sticking to the code. The Dutch code also requires that banks create an executive board within the bank to ensure that they always treat their clients with due care and that that message is embedded in the bank’s culture. Dutch banks are subject to audits to ensure these customer policies are in place and are appropriate.
In Australia, the “Code of Banking Practice” is more prescriptive and places more requirements on the bank to look out for its customers in several typical transactions and situations. For example, if a consumer were to guarantee the debt of another debtor, the bank must take several steps to ensure the guarantee is freely entered into, that the person guaranteeing the credit knows about his or her potential liability to repay the debt and must ensure that the person guaranteeing the debt acts independently and free from pressure from the primary debtor. This emphasis on prescriptive rules seeks to ensure that consumers won’t fall prey to well-known problems with banking.
Ireland has the “Consumer Protection Code 2012” ) which is a somewhat of a blend of the Dutch and Australian models. There are general principles for financial institutions based largely on the requirement to act “in the best interests of its customers.” The Central Bank of Ireland then oversees these general principles and ensures the financial institutions are in compliance with the spirit and substance of the code through research, themed inspections, advertising monitoring, and mystery shopping. If an institution is found in violation, they’re subject to sanctions. The Irish code also specifically defines and protects “vulnerable consumers”, who must be accorded special care by banks.
We now have an opportunity for Canada to build a strong, consumer-friendly financial code ourselves, with the consumers giving input. The models mentioned above are worth considering and perhaps borrowing from in our own code.
If you have a bank account or opinions on banking, you have a great opportunity to have your voice heard through the Department of Finance’s Canada’s Financial Consumer Protection Framework: Consultation Paper. Your comments must be sent to the government by February 28, 2014, so do not delay sharing your thoughts. This consultation will be shaping what will be our own consumer code for Canadian banking, and it needs Canadian voices to guide it. We can change the way Canada does banking for the better with your help!
A summary of this consultation and why it’s important to you is available at Tell the government what you think of banking.