Archived - Recent Financial Consumer Initiatives
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Currently, the Financial Consumer Agency of Canada (FCAC) undertakes a number of financial literacy initiatives, focusing mainly on the creation of tools, programs and publications to build awareness and develop the financial literacy of Canadians.
In 2009, the Task Force on Financial Literacy was launched to provide advice and recommendations to the Minister of Finance on a national strategy to strengthen the financial literacy of Canadians. The Task Force submitted its final report to the Minister in January 2011, outlining 30 recommendations. In response to the Task Force’s key recommendation for dedicated leadership, Budget 2011 announced that a Financial Literacy Leader would be appointed to promote national efforts and pledged an additional $3 million per year in funding for this purpose. Bill C-28, the Financial Literacy Leader Act, tabled on November 30, 2011, will deliver on the Budget 2011 commitment to establish a framework to appoint a Financial Literacy Leader.
To help Canadian borrowers better manage their financial positions, regulations in relation to credit agreements, including lines of credit and credit cards, came into force in 2010. These regulations limit business practices that are not beneficial to consumers and require the provision of clear and timely information to Canadians about credit products, with a particular emphasis on credit cards. Specifically, the regulations:
- Mandate an effective minimum 21-day, interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full;
- Lower interest costs by mandating allocations of payments in favour of the consumer;
- Allow consumers to keep better track of their personal finances by requiring express consent for credit limit increases;
- Limit debt collection practices that financial institutions use in contacting a consumer to collect on a debt;
- Prohibit over-the-limit fees solely arising from holds placed by merchants;
- Provide clear information in credit contracts and application forms through a summary box that sets out key features, such as interest rates and fees;
- Assist consumers to manage their credit card obligations by providing information on the time it would take to fully repay the balance, if only the minimum payment is made every month; and
- Mandate advance disclosure of interest rate increases prior to their taking effect, even if this information had been included in the credit contract.
In addition, the regulations require that any disclosure be made by a federally regulated financial institution in language, and presented in a manner, that is clear, simple and not misleading.
Unsolicited Credit Card Cheques
To assist consumers in managing credit indebtedness, the Government is moving forward with its Budget 2011 commitment to ban federally regulated financial institutions from the distribution of unsolicited credit card cheques. A number of credit card issuers offer credit card cheques which allow funds to be withdrawn directly from a credit card. These cheques are considered to be cash advances, which can accrue higher interest rates and fees and do not allow an interest-free grace period. The regulations were published in Part II of the Canada Gazette on October 10, 2012. The regulations will come into force nine months after registration.
To support consumer awareness and informed decision making, the regulations would require federally regulated financial institutions to disclose to consumers relevant information at appropriate points in time. The regulations also limit certain business practices that could be harmful to consumers and afford them increased access to their prepaid funds.
Mortgage Prepayment Penalties
On March 4 2012, the Government announced the introduction of a new Code of Conduct to assist borrowers in making decisions about the prepayment of their mortgage. The Code of Conduct for Federally Regulated Financial Institutions—Mortgage Prepayment Information requires federal financial institutions to explain the differences between mortgage products, including ways to pay off a mortgage faster without incurring penalties. The Code also requires that they provide more information on how prepayment charges are calculated. Two elements of the Code came into force on September 4, 2012 while the remaining three elements, which require additional system changes, will come into force on March 4, 2013.
Negative Option Billing
The Negative Option Billing Regulations require federally regulated financial institutions to first obtain consumers’ express consent before providing an individual with a new or optional product or service. The regulations also require federally regulated financial institutions to provide individuals receiving optional products and services, such as credit balance insurance or fraud alerts, with advance notice for end of promotions and changes to the terms and condition of the optional product or service. These regulations came into force on August 1, 2012.
Cheque Hold Periods
The Access to Funds Regulations afford Canadians with greater leverage for financial management by reducing the maximum cheque hold period to 4 days from the current 7 days on cheques less than $1,500. The regulations also provide consumers access to the first $100 within 24 hours. These regulations came into force on August 1, 2012.