July 11, 2018
Katie Rochefort, Manager, Member Relations, Canadian Credit Union Association
As you may know, CCUA has been working on drafting a voluntary credit union Market Conduct Code (MCC). The MCC is being fashioned off a similar code that is in place in Saskatchewan, but adapted to meet emerging policy and potentially regulatory demands of governments across the country. The benefits of a voluntary code include: avoiding the imposition of regulation; creating financial consumer protection co-ordination across the Canadian credit union system; and ensuring consumer protection continues to exist in the credit union sector.
The process has now entered the credit union consultation phase with each provincial Central forming MCC working groups in their jurisdictions comprised of credit union representatives; we would like to thank all those who put their names forward. These working groups will be meeting throughout the summer and providing feedback that will inform the MCC, which is expected to be finalized in November/December 2018. The final version will be circulated throughout the system for comment.
Why are we creating a voluntary market code?
A voluntary consumer code has several advantages
Credit unions are proud of their differences with banks; they aren’t looking to mislead consumers.
A voluntary consumer code can:
Why this matters
- Avoid jurisdictional obstacles and redundant regulations as credit unions are mostly provincially regulated;
- Complement or expand traditional regulatory regimes’
- Stimulate public participation in the development, implementation, and modernization of standards; and
- Ensure that smaller credit unions, who do not have the scale to handle expansive new compliance obligations, can remain viable in a competitive financial environment.
Banking terminology background
- It has been demonstrated through multiple studies that the regulatory compliance burden falls most heavily on smaller credit unions.
- An industry led consumer code is the most effective means for the government to achieve its objective of ensuring that consumers know what type of financial institution they are dealing with. Credit unions don’t want to be confused with banks and always put the interests of their members first; they are willing to act without the threat of regulation.
- A voluntary code can be implemented far quicker than regulation.
The federal government announced in Budget 2018 that credit unions could use generic banking terms, subject to disclosing the following:
- the type of cooperative entity it is,
- the jurisdiction under whose laws it is primarily regulated,
- whether it participates in a deposit insurance system in Canada, and if so, the name of that system, and
- any other information prescribed by regulation.
Finance Canada may develop detailed regulations governing disclosure in the next 18 months. This provides an opportunity for credit unions to develop their own Market Conduct Code that will enable them to avoid prescriptive regulations.