François-Philippe Champagne, Canada’s finance and national revenue minister, announced that new regulations, which capped the non-sufficient funds (NSF) fees charged by federally regulated banks at $10, took effect on Mar. 12, in an effort to save Canadians over $600 million annually.
“High non-sufficient funds fees worsen financial difficulty for Canadians who are struggling to make ends meet,” said Wayne Long, secretary of state responsible for the Canada Revenue Agency and financial institutions, in a news release.
The Financial Consumer Agency of Canada (FCAC) shared that NSF fees usually ranged from $45 to $48, regardless of the size of the account shortfall and potentially charged in swift succession in the event of numerous declined payments, before the Regulations Amending the Financial Consumer Protection Framework Regulations became operative.
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“The new NSF fee regulations represent an important step forward in consumer protection,” said Shereen Benzvy Miller, FCAC commissioner, in a news release. “These fees disproportionately affect Canadians who are already struggling financially.”
As additional protections, the new rules also prevent charging a financial consumer:
- an NSF fee on a personal deposit account when the overdraft amount on that account is under $10
- an NSF fee more than once within two business days for the same deposit account
- over $10 in NSF fees when they do not have sufficient funds in their deposit account to cover a payment
“By capping NSF fees at $10 and strengthening consumer protections, we’re helping Canadians keep more of their hard-earned money while making everyday banking fairer and more affordable,” Champagne said in the news release.
The federal finance department noted that more than one in three Canadians incur an NSF fee annually. Apart from safeguarding consumers, the news release noted that the new regulations aim to:
- Make banking more affordable for Canadians
- Treat consumers more fairly
- Provide meaningful relief for those impacted by high penalty fees and lacking in overdraft protection, such that a single missed payment would not trigger a spiral of debt
“Even if someone is just $5 short when paying a bill or covering a cheque, they can be hit with a non-sufficient funds fee as high as $50,” Champagne explained. “That’s money that could otherwise go toward groceries, medicine, or other everyday essentials.”
The FCAC, which oversees the industry’s compliance with the new fee requirements to help protect consumer rights and interests, expects to publish a report regarding the structure, level, and transparency of fees charged by the country’s banks later this year.
Low-cost, no-cost accounts
Champagne noted that the federal government’s recent efforts to make banking more affordable included offering low-cost and no-cost bank accounts, which fully came into force last Dec. 1, thanks to a modernized commitment signed by 14 federally regulated financial institutions, including the nation’s six largest banks. Specifically:
- All Canadians can avail of accounts costing a maximum of $4 monthly, with up to 50 percent more debit transactions
- Young people, students, seniors receiving the guaranteed income supplement, and beneficiaries of the registered disability savings plan can access accounts costing $0 monthly, offering the same features