In The 2023 Annotated Bank Act (Thomson Reuters, 2022), there are a number of important changes from the previous edition, given recent case law and legislative changes. This is one of a series of posts which dissects and discusses these changes and their relevance for the banking industry in Canada.
One of the most significant developments in banking law last year was the enactment of comprehensive reforms to how banks deal with their customers. The former sections addressing this relationship (ss 439.1-459.5) were repealed and replaced in 2022 with an entirely new Part XII.2. Part XII.2, titled “Dealings with Customers and the Public” came into force alongside a new set of Financial Consumer Protection Framework Regulations (SOR/2021-181).
To put this key Part in context, let’s first step back and look at how the Bank Act gives banks capacity and governs the activities that flow from their use of that capacity. Broadly speaking, the Bank Act gives banks “the capacity of a natural person and…the rights, powers and privileges of a natural person” (s 15). Their power is then limited by other sections of the Act: “[a] bank shall not carry on any business or exercise any power that is restricted by this Act” (s 15(2)). Part VIII, “Business and Powers,” sets out in detail the extent and limits of bank powers.
Part VIII broadly covers what constitutes the “business of banking” and how it is regulated. The recently repealed sections dealing with bank-customer relations (ss 439.1-459.5) were found in this Part, and placed various obligations on banks in these regards.
New Part XII.2 overtakes the earlier bank-customer provisions and provides a more comprehensive regulatory framework for banks dealings with consumers. In other words, Part XII.2 is punched out from the regulation of banking business generally, and created as a free-standing set of requirements, tracking the general trend in consumer protection efforts in recent years. Together with the Financial Consumer Protection Framework Regulations, banks are now subject to a harmonized and much more comprehensive set of requirements with respect to their dealings with customers.
Most notably, the new framework of regulations requires banks to follow an expanded set of transparent and equitable practices when dealing with consumers. While we wait for the first cases interpreting the new provisions, case law for the repealed sections of Part VIII may still serve as a helpful aid in the interpretation of these new provisions to the extent that there are similarities in the two sets of provisions. Ultimately, new cases will shed further light on the new framework and provide the contours of banks’ expanded obligations toward consumers.
For further detail and commentary on Part XII.2, check out pages 909-76 of The 2023 Annotated Bank Act (Thomson Reuters, 2022).