The federal budget promotes measures on open banking and lower fees

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TORONTO – The federal budget pushed several banking sector initiatives, including open banking and lower fees, but gave few details about when the changes would actually take effect.

Open banking was one of the areas most closely monitored by the financial industry. Also called consumer-driven financing, it would allow consumers to securely share their financial data between institutions and apps to take advantage of services such as budget management and broader lending options.

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Consumer advocates and fintech companies have been pushing for quick adoption of the system, which is already implemented in dozens of countries, to provide more options and potentially lower costs.

In the budget, the government pledged to introduce some of the necessary legislation this spring and the remaining elements in the fall, and appointed the Financial Consumer Agency of Canada to oversee it, but did not specify an expected implementation date.

“We would have liked to see a formal launch date for the open banking framework,” EQ Bank CEO Andrew Moor said in a statement.

He said the bank would also have liked to see a higher level of investment in the system to ensure its success.

The federal government committed $1 million this fiscal year to help FCAC get started and allocated $4.1 million over three years for the Department of Finance to complete necessary policy and oversight work.

However, using the existing FCAC, rather than creating a new agency, should save time and money, said Saba Shariff, director of strategy, products and innovation at Symcor Inc., a business process services provider.

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“I think naming it is much faster than completely setting up something new,” Shariff said.

He said it was too expensive for the UK to set up a new agency when it implemented its system which cost hundreds of millions of pounds.

However, the lack of a specific timeline presents a challenge for companies hoping to prepare for the new system, he said.

“Every organization that is going to participate in this framework needs to know how many months they will be dealing with.”

The lack of deadlines for implementation is also something that is shared with other banking initiatives.

The government has pledged to limit non-sufficient funds fees to $10, below the $45 to $50 range typically charged by big banks. It also plans to incorporate additional safeguards, such as alerting when a consumer could be charged, prohibiting multiple NSF fees on the same transaction, and not allowing overdraft fees of less than $10.

The budget said the government would publish draft regulations on the measure in the coming months, but there was no deadline for when the new rules could come into force.

Despite the lack of a date, the news was welcomed by poverty advocacy group ACORN Canada.

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“Finally, low- and moderate-income people are getting a reprieve from corporate abuse,” leader Alejandra Ruiz Vargas said in a statement.

The government’s efforts to improve free and affordable bank accounts are more vague.

The budget says the government plans to negotiate broader access to low- and no-cost bank accounts, and add more services to them. He said he would order the FCAC to strike new deals with suppliers, including big banks.

As the government launches new initiatives, advocates still hope it will implement some that are already in the works, including reducing the maximum allowable interest rate from 48 percent to 35 percent on an annual percentage rate. Draft regulations were published in December, but it is unclear when the fee will be reduced.

In the budget, the government pledged to go further to protect against what it calls predatory lending, announcing it will remove the requirement for the Attorney General to approve prosecutions for illegal and predatory lending.

It says it will also work with provinces, which have jurisdiction over much of the payday lending space, to limit the cost of insurance, improve pricing transparency and improve data collection.

The Canadian Bankers Association said it is still reviewing the budget to assess its implications.

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