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System brief outlines credit union implications for proposed federal financial consumer protection framework

June 9, 2017

Kate Martin, Senior Policy Advisor, Community Impact

A new system brief: The Proposed Federal Financial Consumer Protection Framework: Implications for Credit Unions, details elements of a proposed federal financial consumer protection framework that was introduced as part of legislation (Bill C-29) in October 2016, but then was later removed from legislation as it created political controversy. The framework promised to bring together the disparate consumer provisions governing federal financial institutions into one place, make a few additions, and – crucially – make it clear that federal financial institutions only had to follow one set of rules, namely the federal rules, a concept referred to as “paramountcy.”

Despite removing the proposed federal financial consumer protection framework from legislation, the federal government has signaled that it will be reintroduced. Over the course of the winter of 2016 and leading into spring of this year, the Financial Consumer Agency of Canada (FCAC) has been leading a direct consultation and review of the framework, which will inform the shape that the framework will take when reintroduced by the federal government.

CCUA participated in the direct consultation this spring, sharing an inventory of consumer protection measures in each province with the FCAC.

This system brief provides an overview of the consumer protection framework as it was originally proposed, and analyzes what the framework will likely mean for credit unions. Notably, a future framework could have the following implications for credit unions:

1. As introduced, the framework would not have had direct bearing on provincial credit unions but would have impacted federal credit unions. However, the paramountcy clause would have created a two-tier consumer protection regime between financial and provincial institutions.

2. Federally regulated financial institutions, including federal credit unions, would have been subject to federal rules without any requirement to respect provincial rules that govern provincial credit unions. In a situation where a province had more robust rules than the federal government, bank customers and federal credit union members would be disadvantaged relative to provincial credit union members. However, in a situation where the federal government’s rules were more robust than the province, provincial credit union members would be at a disadvantage relative to bank customers and federal credit union members.

The system brief will be updated as we learn more about the evolving federal revisions. In an appendix, there is a detailed comparison of existing measures with those proposed in the Consumer Protection Framework.

Click here to access the system brief.