Article
Introduction
The CBA, and its more than 60 domestic and foreign bank members, is grateful for the opportunity to contribute to the Government of British Columbia’s upcoming budget. Amid the current geopolitical climate and shifting U.S. tax and trade policy, there is an opportunity to make changes to the business and regulatory environments across Canada to establish a strong and resilient economic foundation. The recommendations that follow the introduction, enable the banking sector to build on its strong foundations of value, innovation, and stability to serve British Columbians and provide a roadmap for a prosperous and thriving economy.
Recommendation 1
We recommend the Government of British Columbia promote the interoperability and harmonization of financial services regulatory regimes across Canada by:
- Exempting financial products and services from provincial consumer protection legislation.
- Continuing to align its Personal Information Protection Act (PIPA) with the federal privacy legislation.
- Ensuring stakeholders are engaged in advance.
As internal barriers fall in Canada, the financial services sector is committed to support increased trade by financing businesses and home ownership, supporting savings and investing, as well as insuring against risks and processing payments. Yet, there are opportunities to address inconsistent and overlapping provincial regulations. The 2024 Fall Economic Statement (FES) noted that the federal government is working with provinces and territories to incorporate financial services rules in the Canadian Free Trade Agreement and engaging provinces and territories in an ongoing dialogue to coordinate financial sector policy development and promote regulatory cooperation. The CBA believes that British Columbians can benefit from increased coordination, cooperation and harmonization.
Exempting financial products and services that are otherwise regulated under other legislation including those regulated under the Bank Act from provincial consumer protection legislation would prevent regulatory duplication and ensure consistent protections for financial consumers across Canada. This would be consistent with the approach under B.C.’s privacy legislation.
Continuing to align B.C.’s Personal Information Protection Act (PIPA) with the principles-based framework of the federal privacy legislation will ensure a consistent approach across the private-sector in privacy protection both domestically and globally, benefitting B.C. businesses and residents alike. Any reforms to PIPA (i.e., insertions or amendments to definitions) should be harmonized with existing private sector definitions and concepts, as inconsistent privacy requirements across jurisidictions may increase compliance costs and create barriers to innovation. Any reform efforts to PIPA should complement federal initiatives, whether focused on enhancing consumer protections (e.g., combatting financial crime) or enabling innovation (e.g., Consumer-Driven Banking). Alignment with federal initiatives will ensure regulatory consistency and increase consumer choice as well as trust.
Ensuring that impacted stakeholders are engaged well in advance of any proposed new or changed laws, rules or regulations via an effective public consultation process is also essential.
Recommendation 2
We encourage the Government to support the adoption of a financial consumer protection regime for payment service providers (PSPs) and to extend such standards to entities that embed payments processing for merchants. We further encourage the Government to work with Canadian jurisdictions to establish a consistent, nationwide market conduct framework.
British Columbians, along with Canadians, continue to adopt new payment methods offered by non-traditional PSPs, including Big Tech. At present, these PSPs are largely un- or under-regulated.
Globally, the G20 and OECD have recognized that financial consumer protection requires a more targeted set of principles than general consumer protection that seek to address key risks to consumers in financial transactions. Failure to address the risks can decrease consumer trust in the financial system. Financial services and products have the potential to disproportionately impact the well-being of consumers and must be addressed specifically rather than through overarching consumer rights across banks and PSPs.
While the Bank of Canada and Finance Canada have developed a federal supervisory framework for PSPs under the Retail Payment Activities Act to address certain financial and security risks, the framework is silent on market conduct. With some 3,000 PSPs currently operating in Canada and expected increases in consumer usage of PSPs once they are supervised by the Bank of Canada, the absence of market conduct regulation is a significant gap in consumer protection.
It is important that B.C. work to align its market conduct approach with other provinces and the federal government to provide an overall consistent framework in Canada. This would ensure similar protections for consumers across the country as well as avoiding duplication or differing rules for British Columbia-based PSPs that operate in multiple provinces.
We believe that British Columbians and Canadians should continue to benefit from secure, reliable and consistent financial services. Therefore, it is important that un- or under regulated players do not introduce risk into the existing stable financial system. Ultimately, any market conduct framework would abide by the principle of "same activity, same risk, same regulation."
Recommendation 3
We urge the Government to ensure adequate resources to hold individuals accountable for financial crimes by:
- Improving fraud reporting processes
- Providing financial education to consumers to prevent fraud
- Encouraging a cross-sectoral approach for fraud prevention
- Ensuring there is specialized police training, funding, and dedicated resources to respond to fraud
Financial crimes impact Canadians by an array of activities including scams, identity theft and account takeovers, with some crimes even linking back to organized criminal networks operating outside of Canadian borders. In Canada, reported fraud incidents have doubled over the past decade, continuing to grow and evolve into activity that impacts physical and public spaces. For this reason, governments, the financial and telecommunications sectors, online platforms all need to continue working closely with each other, as well with law enforcement and the justice system to combat financial crimes under the Criminal Code of Canada.
Policy opportunities related to policing and law enforcement include:
- Ensuring there is specialized police training, funding, and dedicated resources for law enforcement and prosecutors to respond to fraud
- Ensuring that consumers have the tools they need to protect themselves against scams through amplifying education and awareness messaging
- Ensuring there are adequate resources to mitigate repeat offenses from fraudsters
- Ensuring Canada works with international governments and law enforcement to mitigate fraud and deter international criminal activities
- Improving fraud reporting processes
- Leveraging Ontario's Serious Fraud Office as a model to be replicated at provincial and federal levels for investigation and prosecution of complex financial crimes
Protecting Canadians against fraud requires a strategy that proactively identifies and effectively responds to fraud incidences throughout their lifecycle. Without greater cross-sector coordination, financial responsibility of fraud is disproportionately assigned to financial institutions, including banks. Disproportionately assigning liability for fraud can disincentivizes other sectors (e.g., telecoms, digital platforms, etc.) from identifying and mitigating scams to protect consumers.
In addition to cross-sector coordination, our experience underlines the need for an approach that considers individual circumstances, encourages responsible consumer behaviour, and bolsters education. It is imperative that scams are prevented before they occur, while also ensuring that perpetrators face consequences to prevent recurrence.