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Federal Budget 2022: Impacts & Implications for Doing Business in Canada

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Toronto
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Date

April 13, 2022

Time of event

Morning

McCarthy Tétrault | Public Sector invites you to join us and special guests for a discussion on the April 7, 2022 federal budget and what it means for your business this year and beyond. 

Speakers will dive deep into significant policy, practical and legal in-depth takeaways, focusing on growth opportunities and challenges for the business community.

Our panelists are:

  • Derek Burleton, Vice President & Deputy Chief Economist, TD Bank Group
  • Brittney Kerr, Business Performance Lead, Earnscliffe Strategies
  • Paul Zed, Experienced Parliamentarian; Counsel and Strategic Advisor, McCarthy Tétrault
  • Moderated by Awanish Sinha, Partner and Co-Lead | Public Sector, McCarthy Tétrault LLP

We would be delighted for you to join our audience of business leaders for this thought provoking virtual event. If you would like to attend, please register here.

For questions about this event, please contact [email protected].

Time:

10:00 a.m. - 11:00 a.m. (ET)
8:00 a.m. - 9:00 a.m. (MT)
7:00 a.m. - 8:00 a.m. (PT)

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Key Takeaways from our ‘Spring Outlook: The Business Impact of the Federal Budget and Recent Geopolitical Events” Panel Discussion

On April 29, 2021, McCarthy Tetrault’s Strategic Advisory Group hosted “Spring Outlook: The Business Impact of the Federal Budget and Recent Geopolitical Events”. Paul Zed (former Member of Parliament and Chair of several parliamentary committees, Counsel and Strategic Advisor, McCarthy Tétrault) moderated a panel discussion on the 2021 Federal Government Budget (“Budget 2021”) and other recent geopolitical events. Our panelists included:

A recording of the webinar is available to view online.

The following are key takeaways from the panel discussion.

1. Climate Action and a Green Economy

We are living in unprecedented times. Budget 2021 indicates that the federal government is willing to spend whatever it takes to get Canada through the COVID-19 pandemic. Analysis of Budget 2021 also demonstrates how seriously the Canadian Government takes climate change. Climate change initiatives are a central part of the stimulus package.

Prime Minister Justin Trudeau has also recently stated that by 2030 Canada will reduce emissions by 40 to 45 percent below 2005 levels. This is a substantially more ambitious target compared to Canada’s original commitment to reduce emissions by 30 percent below 2005 levels. Reaching this target by 2030 is going to require a major effort from governments around the world in coming years. Highlights of green economic policies in Budget 2021 include $5 billion over the next seven years to support industrial transformation by helping carbon intensive sectors like oil and gas, cement and steel producers reduce their emissions and a $4.4 billion plan to retrofit residential buildings to make them more energy efficient. Further, Budget 2021 proposes to allow businesses that are in the clean energy space to take advantage of accelerated tax depreciation for certain types of equipment.

On March 25th, 2021, the Supreme Court of Canada (the “SCC”) held the Greenhouse Gas Pollution Price Act (the “GGPPA”) as constitutional. Ontario, Alberta and Saskatchewan had challenged the GGPPA on the grounds that it was a disguised tax measure that encroached on their provincial jurisdictions. The SCC decision affirms the federal government’s authority to regulate greenhouse gas emissions through a greenhouse gas pricing system. For businesses, this decision provides regulatory certainty for companies that are seeking to formalize their emission-reducing targets, as well as financial projections.

2. Child Care

Perhaps the most publicized aspect of the Budget 2021 is the approximately $30 billion commitment over the next five years to build a Canada-wide early learning and child care system. This is a much welcomed development for the economy, for women and for Canadian families. COVID-19 has hit everyone hard but the impacts have not been spread evenly. Women have been disproportionately been forced to take on additional unpaid domestic responsibilities and are more likely to work in industries where jobs were lost. This has resulted in tens of thousands of Canadian women leaving the labour force entirely.

A national universally accessible child care program will help to reverse these trends. The experience in Quebec, which already has a universal child care system, shows us the positive impacts this program will have. Universal childcare will allow more Canadian women to enter the workforce and allow women to remain in the workforce as they start families. This will help drive macroeconomic growth and the increased productivity generated by the program is widely predicted to cover its cost.

It must however be noted that child care is a provincial responsibility. The federal government must reach agreements with each of the provinces which will take a significant amount of time and resources. While the announcement is a much welcomed first step, we are unlikely to see the full benefit of a national universal child care system anytime soon.

3. Tax

For a more detailed analysis of the tax measures outlined in Budget 2021 please see our publication “2021 Canadian Federal Budget Commentary – Tax Initiatives” written by our National Tax Group. Key measures include:

  • a new earnings-stripping rule intended to address the potential erosion of the Canadian tax base through what the Government considers to be the inappropriate deduction of interest expense payable by a Canadian taxpayer;
     
  • the extension of existing COVID-19 support programs and the addition of the new Canada Recovery Hiring Program, which is intended to facilitate hiring back laid-off employees and hiring new employees. Publicly listed corporations (and any employer controlled by a publicly-listed corporation) need to be aware that they will be required to repay Canada Emergency Wage Subsidy amounts received for qualifying periods beginning on or after June 6, 2021, in the event that the aggregate compensation for specified executives during the 2021 calendar year exceeds the aggregate compensation for specified executives during the 2019 calendar year; and
     
  • Budget 2021 proposes to reduce the federal corporate income tax rates on certain eligible zero-emission technology manufacturers, to expand the list of eligible clean energy equipment entitled to accelerated tax depreciation, and to introduce a new tax incentive for carbon capture, utilization and storage technologies.

Canadian businesses should also keep a close eye on new tax proposals in the United States. President Biden’s  “Made in America Tax Plan” is designed to undo many of the tax changes that resulted from the Tax Cuts and Jobs Act passed in 2017 and to raise revenue to fund ambitious infrastructure and other spending plans.
 

4. COVID-19

Canada’s slow start in its vaccine rollout was due largely to the fact that it doesn’t produce vaccinations domestically. Budget 2021 proposes numerous investments to combat this issue, with $500 million earmarked for capital and infrastructure at universities and research hospitals, and $1 billion set aside for the Strategic Innovation Fund to assist various life science and bio-manufacturing companies. Despite this slow start, Canada is now vaccinating a bigger share of its population per day than any other G20 country, except for the United States.

Please contact Paul Zed, Martha Harrison or Kim Brown if you require additional information to determine the potential impact of Budget 2021 or other recent geopolitical events on your business.

Keep checking our posts in the Spotlight Series, a weekly blog series focusing on COVID topics relevant to your business. To learn more about these issues the McCarthy Tétrault COVID-19 Recovery Hub is full of relevant, detailed and accessible information about the COVID-19 pandemic and other matters that affect Canada’s economy and your business.

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The New Federal Data Commissioner: A Glimpse into the Future

The Government of Canada’s Budget 2021 provides a glimpse into what the future may hold for the proposed federal Data Commissioner. With a mandate to inform government and business approaches to data-driven issues and oversee new regulations for large digital companies, the Commissioner’s work will have significant implications for Canadian businesses whose operations have a data component.

The New Federal Data Commissioner: What We Know So Far

Background

A commissioner is a public officer appointed by statute in order to perform specific public functions. The roles, powers, and responsibilities of commissioners in Canada vary widely. Some have broad investigatory, adjudicative, and sanctioning powers, while others have more limited authority to perform specific, discrete functions. Similarly, some have broad responsibilities requiring significant resources, while others have more limited responsibilities and correspondingly smaller budgets. Commissioners play an important role in Canadian society and, in many respects, the Canadian economy.

In his December 13, 2019 mandate letter to the Minister of Innovation, Science and Industry, the Prime Minister called for the creation of a new federal Data Commissioner to oversee new regulations for “large digital companies” aimed at protecting individuals’ personal data and encouraging greater competition in the digital marketplace. Since then, the government has introduced its long-awaited bill (Bill C-11) for the replacement of Canada’s federal private-sector privacy legislation (the Personal Information Protection and Electronic Documents Act) with the new Consumer Privacy Protection Act and the Personal Information and Data Protection Tribunal Act (see our blog post on the proposed legislation here). However, the government had provided relatively little information about the proposed Data Commissioner.

On April 19, 2021, the government released the Budget. A key theme of the section titled “Helping Canadian Businesses Grow and Succeed” is the need to support the digital economy, including by “better protect[ing] the privacy, security, and personal data of Canadians, [and] building[ing] trust and confidence in the digital economy”. As part of these efforts, the government proposes to create a new Data Commissioner, and the Budget offers some insight into the Data Commissioner’s mandate and budget.

The Data Commissioner’s Mandate: Protecting Canadians’ Data and Encouraging Innovation

The Budget indicates that the Data Commissioner’s mandate will be to “inform government and business approaches to data-driven issues to help protect people’s personal data and to encourage innovation in the digital marketplace”. The twin themes of protecting Canadians’ data and encouraging innovation feature prominently in the Budget’s description of the context within which the Commissioner will perform their work:

Digital and data-driven technologies open up new markets for products and services that allow innovative Canadians to create new business opportunities—and high-value jobs. But as the digital and data economy grows, Canadians must be able to trust that their data are protected and being used responsibly.

The Budget’s Impacts Report similarly highlights the twin themes of protecting Canadians’ data and encouraging innovation, noting that “[a] well-functioning online marketplace and thriving data-driven technology sector benefit all Canadians by ensuring a proper balance with privacy protections and other social considerations”.

In addition, the Impacts Report indicates that one of the Data Commissioner’s focus areas will be the use of data in artificial intelligence (“AI”) systems and, in particular, ensuring that AI systems do not perpetuate biases or historical disadvantages. The Impacts Report observes that “[t]here can be biases in the data used by artificial intelligence systems that inform real life decisions that affect people’s lives, particularly historically disadvantaged demographic groups”, and “[e]fforts by the Data Commissioner to promote positive uses and outcomes associated with data, while identifying and mitigating harmful and negative consequences, are expected to particularly benefit historically disadvantaged groups”.

The Data Commissioner’s Budget

The Budget allocates $17.6 million over five years beginning in 2021/22, and $3.4 million per year going forward, to support the Data Commissioner’s work. To put those numbers in perspective, the Privacy Commissioner of Canada has an annual budget of over $40 million, the Canadian Human Rights Commission has an annual budget of over $25 million, and the Information Commissioner of Canada has an annual budget of over $10 million.

Potential Overlap

It remains to be seen how the Data Commissioner’s work will connect with, complement, or overlap with the work of other commissioners or regulators whose work has a significant data component, not to mention overlaps with rights or remedies available under statutes or the common law. For example, the Data Commissioner’s mandate appears to have some overlap with that of the Privacy Commissioner, which is to oversee compliance with the Privacy Act and the Personal Information Protection and Electronic Documents Act, report on the personal information handling practices of public and private sector organizations, and protect and promote individuals’ privacy rights. As discussed in our earlier blog post, both the federal government (through Bill C-11) and the Quebec government (through Bill 64) propose to use privacy laws to regulate automated decision making. These proposals signal that privacy commissioners will have a role in regulating AI systems — a potential focus area of the Data Commissioner or even private litigants as well. Clarity on the respective spheres of jurisdiction in the areas of data and privacy would be a welcome development for Canadian businesses, which already face a multiplicity of laws and regulations in these areas.

Looking Ahead

Given the increasingly important role of data in the Canadian economy, the Data Commissioner’s work will have significant implications for many Canadian businesses. In the coming months, we expect to see the government release more information about the Data Commissioner and the proposed regulations for large digital companies. As that information becomes available, Canadian businesses should consider the impact on their operations.

To learn more about our Cyber/Data Group, please contact Charles Morgan or Daniel Glover. To receive timely updates, please subscribe to our TechLex blog.

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Budget 2021: Financial Institutions Update

The 2021 federal budget (the “Budget”) included a number of measures directed to the financial services sector, including measures in respect of credit card interchange fees, the retail payments oversight framework, the federal unclaimed assets regime, a proposed clarifying change to the federal financial consumer protection framework, the announcement of consultations in respect of the criminal rate of interest, and proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “PCMLTFA”), the Canada Deposit Insurance Corporation Act (the “CDIC Act”), the Payment Clearing and Settlement Act (the “PCSA”). Finally the Budget also provided that the sunset date for the federal financial institution statutes be extended to 2025. A number of these measures were previously announced in the 2020 Fall Economic Statement (see our summary here).

Payments Regulation – Lowering Interchange Fees, Implementing the Retail Payments Oversight Framework and Amendments to PCSA

The federal government announced that it will engage with key stakeholders with respect to interchange fees to work towards three objectives: (i) lowering the average overall cost of interchange fees for merchants, (ii) ensuring that small businesses benefit from pricing that is similar to large businesses and (iii) protecting existing rewards points of consumers.

Following these consultations, next steps will be outlined as part of the Fall Economic Statement, including legislative amendments to the Payment Card Networks Act that would provide authority to regulate interchange fees, if necessary.

In addition, the federal government proposes to:

  • introduce (long anticipated) legislation to implement a new retail payments oversight framework, including working with the provinces to implement a framework that promotes growth, innovation and competition in digital payment services;

  • clarify the Bank of Canada’s authority to oversee payment exchanges under the PCSA;

  • amend the PCSA to clarify how investors, creditors and other participants may be compensated as a result of actions taken by financial sector authorities to sell, wind-down or restore to viability a failing financial market infrastructure.

The Budget did not address consumer-directed finance (open banking) nor announce any additional developments in this area.

Anti-Money Laundering Measures – Amendments to PCMLTFA

The federal government proposes to introduce amendments to the PCMLTFA to:

  • strengthen criminal penalties and the registration framework for money services businesses (“MSBs”);

  • regulate armoured car services under the PCMLTFA;

  • enable the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) to recover its compliance costs; and

  • clarify FINTRAC’s ability to obtain information from reporting entities and to expand the information that it can disclose.

In addition, the federal government proposes to provide an additional $4.6 million over four years and $0.6 million per year thereafter to enable FINTRAC to build its expertise with respect to virtual currency, supervise the armoured car sector and develop and administer a cost recovery scheme for its compliance activities.

The Budget also included funding to Innovation, Science and Economic Development Canada to support the implementation of a publicly accessible corporate beneficial ownership registry by 2025, and funding to Transport Canada to further advance the Known Traveller Digital Identity pilot project, testing digital identity technology in the context of air travel. This funding is noteworthy in the context of discussions relating to a so-called vaccine passport, as well as discussions in provinces of Canada relating to digital identification (e.g. drivers’ licenses, health cards, fishing licenses), consistent with the pan-Canadian Trust Framework.

Criminal Rate of Interest

The federal government proposes to launch a consultation on lowering the criminal rate of interest set out in the Criminal Code applicable to, among others, installment loans offered by payday lenders.

Amendment to the Federal Financial Consumer Protection Framework

The federal government proposes to introduce legislative amendments to clarify that application of the statutory right to cancel a contract with a bank under the Bank Act only applies to individuals and small and medium-sized businesses, and excludes large businesses. This should do away with some of the confusion surrounding the application of the new Framework to businesses other than small and medium-sized businesses.

Amendments to the CDIC Act

The federal government proposes to introduce amendments to the CDIC Act to:

  • provide the Canada Deposit Insurance Corporation (“CDIC”) with greater flexibility to facilitate a transaction in circumstances where it takes control of a failed member institution;

  • provide the CDIC with a targeted expansion of its authorities to improve the timeliness and efficiency of the deposit insurance payout process;

  • clarify the scope of, and support, the cross-border enforceability of the stay provisions applicable to eligible financial contracts; and

  • clarify how investors, creditors and other participants may be compensated as a result of actions taken by financial sector authorities to sell, wind-down or restore to viability a failing bank.

Expanding and Modernizing the Federal Unclaimed Assets Regime

The federal government proposes to modernize the federal unclaimed assets regime, by increasing the information available and use of electronic communication, and expanding the scope of the regime to include unclaimed balances from terminated federally regulated pension plans and foreign denominated bank accounts.

Extending the Sunset Date of Financial Institutions Statutes

The federal government proposes amendments to the Bank Act, the Insurance Companies Act, and the Trust and Loans Companies Act to extend their respective sunset dates to 2025. The stated purpose of this extension is to enable full consideration of the impacts of the COVID-19 pandemic on the financial sector as part of the next legislative review.

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Federal Budget 2021: a promising framework for SMRs

For those who are following emerging developments in the nuclear industry, the 2021 Canadian Federal Budget (the “Budget”) contains good news.  The green focus of the Budget includes some exciting policy levers that, when implemented, could provide continuing support, and be instrumental to the development of the industry and of small modular reactors (“SMRs”) in particular.  The tools are there, but questions remain around their application, leaving many details to be determined. 

In terms of policy tools, four stand out:

  1. Tax Break for Manufacturers of Zero-Emission Technologies. The Budget contains an interesting proposal to grant up to a 50% tax break in general corporate and small business income tax rates for businesses that manufacture zero-emission technologies.  The reductions would last for seven years, commencing on January 1, 2022 and then would be phased out over a four year period winding up by January 1, 2032.  Details of the technologies that will be eligible for this tax treatment are left to be determined by the Department of Finance (in consultation with Environment and Climate Change Canada, Natural Resources Canada, Sustainable Development Technology Canada, and other key stakeholders).  Given the anticipated timeline for SMR manufacturers to have commercial production lines that are generating earnings, this tax reduction may not come as a widespread help to the industry. Despite this, it might be available to help first movers and, as is often the case with government programs, could ultimately be extended if it proved to be successful.
     
  2. Net Zero Accelerator. In December of 2020, the Federal Government announced a $3 billion investment towards the Strategic Innovation Fund’s  “Net Zero Accelerator”.  The Budget includes a further $5 billion commitment towards this fund over a period of seven years. The goal of the Net Zero Accelerator is to support projects that “work to cut pollution, spur clean technology innovations, attract major investments, create good middle class jobs, and foster development of key supply chains to ensure Canadian industries and workers can use their low-carbon advantage to compete and win.”  The projects and technologies that are to be supported are again not identified. However, as the Federal Minister of Natural Resources has stated that there is no path to net zero in Canada without nuclear, we expect projects using SMRs will be eligible for Federal Government funding under this program.
     
  3. Green Bond Framework. The Budget announces $5 billion towards a “Green Bond Framework”.  The proposal is that the Federal Government would create a framework that would allow investors to invest in “Green Bonds”, the proceeds of which will be used by fight climate change.  Examples of projects cited in the budget include funding green infrastructure and clean tech innovations.  Details of the Framework are pending but again this is another policy tool that may be available to help the SMR industry.
     
  4. Innovative Technologies. The Budget also announced $1 billion of funding committed over five years directly to help draw in funding to Clean Tech Projects particularly where there is a perceived lack of patient capital or ability to scale up because of the size of the Canadian market. Although details are not stated, we have seen this type of investment model proposed by the government before, where the government commits capital to higher risk projects that are potentially economically viable but have risks that are not well absorbed by private capital. The budget does not explicitly identify nuclear technology as “Clean Tech” but also does not exclude it. Details of the funding will be of great interest to the industry.   

Our team at McCarthy Tétrault will continue to follow refinements to the programs described in the Budget and their impacts on SMRs and the industry. If you would like more information about the Budget and what it could mean for your business, we are here to help.

Please contact Gaëtan Thomas, Stephen Furlan, Seán O’Neill, Audrey Bouffard-Nesbitt or any other member of the Power Group at McCarthy Tétrault should you have any questions or for assistance.

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2021 Canadian Federal Budget Commentary - Tax Initiatives

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2021 Canadian Federal Budget Commentary - Tax Initiatives

2021 Canadian Federal Budget Commentary - Tax Initiatives

2021 Canadian Federal Budget Commentary - Tax Initiatives

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FCAC Issues Its Business Plan for 2020-2021

Note: To view related insights, scroll down to the bottom of this article.

The Financial Consumer Agency of Canada (FCAC) recently posted its 2020-2021 Business Plan (Plan) which set out its priorities and planned activities to protect financial consumers.

New Vision and Mantra

The 2020-2021 Plan is the first issued under Commissioner Robertson’s tenure and is guided by FCAC’s newly articulated vision : to be a leader and innovator in financial consumer protection.  To execute on its vision, FCAC will integrate its regulatory, consumer education and financial literary roles to ensure alignment with its mandate to protect consumers.  This effort will be supported by a new organizational structure and the new operational mantra “One Mandate, One Team”.

Strategic Priorities

1. Enhance regulatory effectiveness        

Objective

Implement new federal financial consumer protection framework

Activities

  • Update internal policies and procedures, including Supervision Framework
  • Support regulatory work for new framework to take effect
  • Consult with regulated entities on guidance, and 
  • Assist regulated entities in their compliance efforts

Objective

Modernize information management and technology tools to improve monitoring and oversight activities

Activities

  • Introduce new case management system to centralize data and streamline processes  
  • Develop business intelligence strategy to facilitate information-sharing and decision-making

Objective

Conduct risk-based and proactive supervision

Activities

  • Complete market conduct profiles of select financial institutions 
  • Conduct sales practices and complaint handling procedures reviews of select small- and medium-sized banks (results to be published in 2021–2022) 
  • Implement data intake and prioritization process to enhance  enforcement work

Objective

Create secretariat to manage quasi-judicial proceedings and external relations

Activities

  • Publish updated guidelines  to clarify FCAC’s roles and responsibilities related to investigative process and Commissioner’s role in adjudicative process
  • Develop policies and procedures related to Commissioner’s new powers
  • Enhance collaboration between Commissioner’s office and domestic and foreign regulators, committees and government agencies

2. Ensure FCAC is an insightful and effective authority in financial education

Objective

Renew Canada’s Financial Literacy Strategy 

Activity

  • Conduct research and consult with stakeholders to identify new target group.  (new strategy to be launched in the Fall of 2020)

Objective

Provide innovative and effective educational resources

Activities

  • Measure impact of current resources and identify gaps to inform development of new resources
  • Identifying new delivery channels in consultation with stakeholders to extend reach of educational tools and programs 
  • Identify best practices to incorporate educational insights into supervisory requirements

Objective

Build expertise and capacity to respond to and anticipate new developments and emerging trends 

Activities

  • Continue to contribute research and expertise to financial consumer policy discussions, including in the areas of consumer-directed banking, an oversight framework for payment service operators, and the protection of consumer data
  • Support the creation of a new federal Canadian Consumer Advocate

Objective

Establish a modernized and integrated approach to research and policy  

Activities

  • Develop a road map
  • Establish a process to identify, prioritize and monitor emerging trends relevant to financial consumers
  • Conduct original research to gain behavioural insights to improve financial decision-making

Objective

Establish an Agency-wide approach to communication, outreach and engagement   

Activities

  • Develop three-year public affairs strategy to position Agency as a leader and innovator in financial consumer protection
  • Launch campaign to mark 10th anniversary of Financial Literacy Month (November 2020)
  • Develop crisis communication plan 
  • Review FCAC web pages

3. Invest in the future

Objective

Build expertise and capacity to respond to and anticipate new developments and emerging trends 

Activities

  • Continue to contribute research and expertise to financial consumer policy  development, including in areas such as consumer-directed banking, the creation of an oversight framework for payment service operators, and the protection of consumer data
  • Support the creation of a new Canadian Consumer Advocate

Objective

Establishing a comprehensive and integrated approach to FCAC’s research and policy function

Activities

  • Develop road map 
  • Establish a process to identify, prioritize and monitor emerging trends related to financial consumers
  • Continue to conduct original research to gain behavioural insights to improve financial decision-making 

Objective

Establish an integrated approach to communication, outreach and engagement

Activities

  • Develop three-year public affairs strategy to reach target audiences and promote use of consistent messaging to ensure brand alignment
  • Launch campaign to mark 10th anniversary of Financial Literacy Month (November 2020)
  • Develop crisis communication plan 
  • Review  FCAC web pages with a view of improving the user experience

Objective

Build the foundation to become a modern Agency

Activities

  • Implement new organizational structure to achieve greater strategic focus (structure to  include new Deputy and Assistant Commissioner positions)
  • Investigate how to modernize workplace and leveraging digital technologies to encourage collaboration and mobility. Consideration will be given to opening a  Toronto office
  • Implement data and analytics strategy to improve how FCAC accesses, collects, uses, safeguards and shares data <
  • Develop evaluation plan to assess  Agency’s programs, initiatives and policy work
  • Review how to apportion FCAC’s operating budget among regulated entities and develop path forward based on industry consultations
  • Develop and publish five-year strategic plan to be achieved during new Commissioner’s mandate. 
  • Update intranet to improve employee

4. Capitalize on the diversity of FCAC’s talent

Objective

Attract, develop and retain a highly skilled, diverse and engaged workforce 

Activities

  • Implement Public Service Employee Survey Action Plan for 2019–22.  (Areas of focus include leadership, performance and development, values and ethics and employee engagement)
  • Develop strategic recruitment and branding initiatives to enhance FCAC’s appeal to high-caliber talent
  • Strengthen talent management with increased focus on learning and development

Objective

Strengthening the foundational elements of a healthy, respectful and enabling workplace 

Activities

  • Continue promoting workplace values and ethics and increase awareness of  importance of mental health
  • Establish official languages and employment equity action plans
  • Update organizational structure, job classifications and terms and conditions of employment

Planned Financial and Human Resources

FCAC has undertaken not to increase its planned spending for 2020-2021.  As a result, its budget will remain at $38.4 million for this fiscal year.  Its forecast does however provide for increases in the 2021-2022 and 2022-2023 fiscal years to $41.1 million and $42.1 million respectively.

Despite committing to a flat budget for next year, FCAC will increase its bench strength by approximately 60 full-time equivalents (FTEs) , bringing its total number of FTEs to 2015 from 145.  The new FTEs will largely be split between the supervision team (22 FTEs) and the internal services team (30 FTEs). 

Federal Financial Consumer Protection Framework Article Series and Related Insights

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Technical Amendments to Certain Bank Act Regulations - Canada Gazette April 2, 2019

Note:  To see related insights of the series, click on the link on the left or scroll down. 

On April 1, 2020, the Canada Gazette[1] published the Regulations Amending Certain Department of Finance Regulations (Miscellaneous Program) (“Regulations”).  These Regulations serve to address issues raised by the Standing Committee for the Scrutiny of Regulations in 2010, related to discrepancies between the English and French versions of the regulator text, duplication, and vague or ambiguous language and typographical/grammatical errors.

The Regulations affect several of the consumer protection regulations under:

Bank Act

  • Cost of Borrowing Regulations
  • Principal Protected Notes Regulations
  • Credit Business Practices Regulations
  • Electronic Documents Regulations
  • Complaints Regulations
  • Negative Options Billing Regulations
  • Registered Products Regulations
  • Deposit Type Instruments Regulations

Insurance Companies Act

  • Credit Business Practices Regulations
  • Complaints Regulations
  • Cost of Borrowing Regulations
  • Electronic Documents Regulations

Trust and Loan Companies Act

  • Cost of Borrowing Regulations
  • Electronic Documents Regulations 

Ambiguous language

  • Credit Business Practices Regulations (Bank Act, Insurance Companies Act):
    • The requirement for information to be provided “without delay” was found to be vague and ambiguous. As a result, the expression was removed from the regulations, as it was found to imply that obligations imposed upon banks should be undertaken in a timely fashion unless a specific time limit is prescribed.

      The expression was also removed from the Complaints Regulations, the Cost of Borrowing Regulations, the Negative Option Billing Regulations and the Principal Protected Notes Regulations.
       
    • The reference to favourable terms in the agreement “such as imposing no penalty or fee for early payment” was replaced by clearer and more succinct language.
       
    • The reference to “pressure” in the Debt Collection Practices section is no longer qualified by “excessive or unreasonable”
       
    • The reference to documents “unlawfully” purporting to originate from a court is replaced with a more accurate adverb, i. e. “falsely”.
       
  • Principal Protected Notes Regulations (Bank Act): The requirement for banks to disclose to consumers “any other information that could reasonably be expected to affect an investor’s decision to purchase the note” was also found to be vague and ambiguous. As such, the requirement was removed from the regulations.
     
  • Cost of Borrowing Regulations (Bank Act, Insurance Companies Act, Trust and Loan Companies Act): The requirement to disclose information such that “sufficient white space is provided around the text” was deemed to be vague and ambiguous. Consequently, the requirement was amended to align with other similar requirements in the same regulation by removing the word “sufficient,” so that text must be clearly visible.

Duplication

  • Electronic Documents Regulations (Bank Act, Insurance Companies Act, Trust and Loan Companies Act) : The requirements related to a consumer’s ability to access and retain a copy of electronic documents where the consumer has provided consent to receive electronic documents is duplicative of the same requirement found in the enabling statute. Therefore, this requirement was removed from the regulations.

Inconsistencies between official languages

  • Credit Business Practices Regulations (Bank Act, Trust and Loan Companies Act, Insurance Companies Act):
    • The English regulatory text identifies certain individuals with whom a debtors may have a relationship but who may not be contacted by institutions for the purposes of collecting the debt (i.e. a debtor, any member of the debtor’s family or household, and any relative, neighbour, friend or acquaintance of the debtor or the debtor’s employer). However the French version identifies a subset of the individuals identified in the English version: “toute personne de sa connaissance — parent, ami, voisin, employeur.” The French version was amended to align with the English version.
       
    • The English version states that institutions are prohibited from communicating with a debtor in a manner that constitutes harassment, including the use of “profane” language. The concept of “profane” is missing from the French version. The French version was amended to align with the English version.
       
  • Electronic Documents Regulations (Bank Act, Insurance Companies Act, Trust and Loan Companies Act):  The English version includes a requirement for electronic documents to be retained for a period of time while the French version does not. As such, the French version was amended to align with the English version.

The Regulations came into effect on March 16, 2020.

 

[1] Part II, Volume 154, Number 7.

Federal Financial Consumer Protection Framework Article Series

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Federal financial consumer protection framework – A closer look at complaints

Note:  This is the third in a series of monthly articles intended to parse the new federal financial consumer protection framework (the “Framework”).  To view other articles in the series scroll down to the bottom of this article.

The January edition of our commentary on the new framework outlined some of the changes likely to impact bank governance. The focus of this installment is to examine Division 1 of Part XII.2 of the legislation, which provides interpretative assistance, through its definitions, in applying the provisions of other Divisions.

Of note, is the fact that the definitions, currently scattered across the Bank Act (“the Act”) and the regulations, have been consolidated under one section (Division 1) of the Act, making it more efficient and reducing the potential for inconsistency. Some definitions make their appearance for the first time, while others have undergone an expansion in scope. The definition of “complaint” falls into the latter category. 

Complaints

Today, a “complaint” is defined as a “complaint that is made by a person

  • (a) to a bank or an authorized foreign bank about a product or service that was requested or received by the person from the bank or authorized foreign bank; or
  • (b) to an external complaints body about a product or service that was requested or received by the person from a member of that body. (réclamation)”

Compare the new definition which reads: “complaint means dissatisfaction, whether justified or not, expressed to an institution with respect to

  • (a) a product or service in Canada that is offered, sold or provided by the institution; or
  • (b) the manner in which a product or service in Canada is offered, sold or provided by the institution. (plainte)”

The expanded definition now includes an element of “dissatisfaction” and is related to a product or service that is offered, sold or provided, rather than one that is requested or received, thereby shifting the focus away from the consumer and more toward the bank.

In addition, any “dissatisfaction” related to a bank product or service falling within the new definition, will be deemed a complaint, regardless of whether it is justified or not. This change is expected to considerably increase the number of complaints banks will have to track and report to the Financial Consumer Agency of Canada (“FCAC”). 

The definition also introduces the notion of the “manner” in which banks sell their products and services. This element was likely added in an effort to capture potential incidences of mis-selling and of other questionable sales practices, to respond to FCAC’s report on bank sales practices. [1]

It would also appear that, while the new definition makes no mention of a complainant’s legal status, as is the case with the current definition, when read in conjunction with the Complaints Process provisions (Section 627.43 and subs.), it is clear that the status quo is maintained (“person”), which means that entities will continue to be caught by the definition.

Undue Pressure

“Undue pressure” which is currently used in the context of tied selling, is now defined by the new Framework. It refers to:

“any pressure, imposed in the form of a practice or communication or otherwise, that could be reasonably considered to be excessive or persistent in the circumstance. (pressions indues)”

The reference to “excessive and persistent practice or communication” raises questions with respect to the phrase’s intended meaning and application. Banks would benefit from guidance from the FCAC to help with its interpretation. 

Along with the additional tracking and reporting of complaints banks will have to undertake and the additional FCAC guidance they will be required to clarify some of the new and reworked definitions, banks will also have put considerable effort in ensuring that the changes described above are adequately captured in their policies, procedures and processes.

In our next installment on the Framework, we will turn our attention to the requirements of responsible business conduct under Division 2 (Fair and Equitable Dealings) of the Act. Read our previous installment here.

[1]Domestic Bank Retail Sales Practices Review - Canada.ca

Federal Financial Consumer Protection Framework Article Series and Related Insights

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