Budget 2013 – A New Federal Consumer Code
March 22, 2013
James H. Archer
Robert P. Metcalfe
As part of its 2013 Budget tabled in Parliament yesterday, the federal government has indicated its intention to develop a "comprehensive financial consumer code to better protect consumers of financial products and ensure they have the necessary tools to make responsible financial decisions."1 This pledge seems to be in fulfillment of Parliament’s intention expressed in the third recital of the new preamble to the Bank Act that was enacted in 2012: "And whereas it is desirable and is in the national interest to provide for clear, comprehensive, exclusive, national standards applicable to banking products and banking services offered by banks;". It is also no doubt in response to the decision of the Québec Court of Appeal in Marcotte v. Banque de Montréal that was handed down in August 2012. In that case, the court found that because the regulatory regime under the Bank Act did not provide for civil recourse for the failure to disclose a foreign exchange fee – and did not exclude such recourse — then provincial legislation that provided recourse in such circumstances could apply. The new code will presumably do its utmost to plug this hole — but will this mean that the code will include remedies for consumers in certain cases of non-disclosure or incorrect disclosure on top of the current penalties and sanctions that may be levied and imposed by the Financial Consumer Agency of Canada?
Given that, the Bank Act alone contains several dozen "consumer provisions" and at least six sets of regulations containing numerous provisions that set out disclosure requirements and regulate certain practices, the consolidation of all of these provisions into a comprehensive code will be a time-consuming and difficult task. The government has indicated in the Budget that it will be engaging in extensive consultations before settling on the new code. This could be a very challenging process for the banks.
On a related matter, the government has indicated in the Budget2 that it will soon be finalizing and releasing the Addendum to the Code of Conduct for the Credit and Debit Card Industry in Canada for Mobile Payments that it released last September. The Addendum is intended to update the current Code so that it will also apply to payments made using the near field communication technology on smart phones in the same way that it currently applies to credit and debit cards.