Canadian Credit Union Association

FCAC Sees an Increase in Enforcement Powers and Mandate

On April 30, 2020, the Financial Consumer Agency of Canada (FCAC) saw important increases in its mandate and enforcement powers come into force.  The changes are the consequence of amendments  proposed in the federal government’s Budget Implementation Act, 2018, No. 2 which was tabled in October 2018.

Under the new provisions, the purpose of the FCAC as articulated in the Financial Consumer Agency Act of Canada Act (FCAC Act) is “to ensure that financial institutions, external complaints bodies and payment card network operators are supervised by an agency of the Government of Canada so as to contribute to the protection of consumers of financial products and services and the public, including by strengthening the financial literacy of Canadians.”

And in support of this purpose, the FCAC is now mandated to “strive to protect the rights and interests of consumers of financial products and services and the public, taking into account the need of financial institutions to efficiently manage their business operations” and “monitor and evaluate trends and emerging issues that may have an impact on consumers of financial products and services, and make information on those trends and issues public.”

However, perhaps amongst the most significant changes for entities supervised by FCAC in this package of amendments are revisions to the Administrative Monetary Penalties (AMP) framework that will see maximum penalties rise dramatically from $50,000 to $1,000,000 in the case of violation committed by a natural person, and from $500,000 to $10,000,000 for violations committed by a financial institution or payment card network operator.  However, somewhat softening the impact are the addition of “duration of the violation” and “ability to pay” to the list of criteria to be considered in arriving at the penalty amount, which include “harm”, “degree of intent or negligence”, and “history…of any prior violation”.  Despite the magnitude of these amounts, a new paragraph has been added to the Act clarifying that “the purpose of the penalties is to promote compliance with consumer provisions” and “not to punish.” 

As well, subject to any regulations, the Commissioner of the FCAC will now be compelled to made public the nature of the violation as well as the name of the violator and the amount of the penalty imposed.  This disclosure “may include the reasons for the decision as well as relevant facts, analysis and consideration that formed part of the decision.”

It is worth noting that this framing is similar to that of AMPs imposed by FINTRAC under the June 2019 changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) which compel FINTRAC’s Director to make this type of information public too.

Other notable changes to the FCAC Act include the introduction of a new discretionary power to compel banks to undergo third-party independent audits if, in the opinion of the FCAC Commissioner, it is required for administering the FCAC Act and enforcing consumer provisions; and a requirement for FCAC to publish the results of its research into the trends and emerging issues affecting consumers of financial productions and services.