Change continues to be the trend in financial services regulation. As we close in on the end of January, we set out below a summary of some notable developments in financial services regulation from 2024 into the new year.
Retail Payment Activities Act (RPAA)
The registration requirement for payment service providers (PSPs) under the Retail Payment Activities Act (RPAA) took effect on November 1, 2024. Domestic and foreign PSPs already operating in Canada were required to submit registration applications to the Bank of Canada between November 1 to 15, 2024. Domestic and foreign PSPs that intend to commence business in Canada before September 8, 2025, are required to submit a registration application 60 days prior to the commencement of business. The substantive obligations under the RPAA – including the requirements to safeguard end-user funds and implement an operational risk management framework – will take effect on September 8, 2025.
To date, over 1,200 PSPs have submitted a registration application. The Bank of Canada continues to send invitations to register to entities that it believes may be carrying on payment functions but have not yet registered.
Criminal Interest Rate Changes
Over the course of 2024, lenders prepared for the amendments to the Criminal Code that lowered the criminal interest rate to an APR of 35% for loans under C$10,000 as of January 1, 2025. A 48% APR cap now applies to midsize commercial loans (C$10,000 to C$500,000), and there is no cap for those over C$500,000.
Note that the federal government had also proposed to include insurance charges within the meaning of “interest” for the purpose of calculating the criminal interest rate under the Criminal Code, which would have significantly restricted lenders’ ability to offer creditor insurance. Based on the 2024 Fall Economic Statement, the government’s proposal to include insurance charges in the interest calculation has been limited to the payday loan context.
Also effective January 1, 2025, are two new criminal interest rate offences: a prohibition to offer to enter into an agreement or arrangement to receive interest at a criminal rate and a prohibition to advertise an offer to enter into an agreement or arrangement that provides for the receipt of interest at a criminal rate.
Anti-Money Laundering (AML)
Many changes were made to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) over the course of 2024, along with other proposed changes introduced. Specifically, regulations were introduced to make factoring companies, cheque-cashing businesses, leasing and financing companies and mortgage entities (namely, mortgage administrators, mortgage brokers and mortgage lenders) all subject to the PCMLTFA. Additionally, white-label ATM operators and title insurers will become subject to the AML regime in 2025.
Significantly, provisions have also been added to the PCMLTFA to allow for information sharing among regulated entities (without consent) to detect and deter money laundering, terrorist financing and sanctions evasion, with an oversight role for such sharing to be carried out by the Office of the Privacy Commissioner.
From a sanctions perspective, reporting obligations to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) by regulated entities will be expanded to include circumstances where a regulated entity holds not only terrorist property but also the property of persons sanctioned under Canada’s sanctions legislation more broadly. This is a significant expansion of existing reporting obligations and would provide FINTRAC with a greater role in assessing sanctions compliance by regulated entities.
Regulated entities under the PCMLTFA will also be required to consult the Canada Business Corporations Act (CBCA) beneficial ownership registry when they onboard a client and as part of their ongoing monitoring obligations where they have high-risk clients that are incorporated under the CBCA. Where a regulated entity identifies a material discrepancy between the information that they collect and the information contained in the registry, they will be required to report the discrepancy to the Director under the CBCA within 15 days after the day on which the discrepancy is identified and maintain a copy of any acknowledgement of receipt of the report.
Office of the Superintendent of Financial Institutions (OSFI) Guidance
Several new or draft OSFI publications were released or took effect in 2024, including the following:
- Integrity and Security Guideline
- E-21 Operational Risk Management and Resilience
- Draft E-23 Model Risk Management
- Regulatory notice – Culture Risk Management
- Revised Regulatory Notice on Commercial Real Estate Lending
- OSFI’s new Supervisory Framework
Revised Guideline B-3 Sound Reinsurance Practices and Procedures took effect on January 1, 2025. OSFI also clarified that new Guidelines B-10 Third-Party Risk Management and B-13 Technology and Cyber Risk Management will apply to foreign insurance company branches and foreign bank branches, effective as of March 31, 2025.
After a barrage of new and amended guidance over the last couple of years, in June 2024, OSFI announced a “Quarterly Release Pilot,” under which guidance will now be released in a consolidated fashion once per quarter. Each quarter’s announcement will include an “Industry Day” media briefing and a high-level stakeholder briefing. The next Quarterly Release is scheduled for February 20, 2025, with a virtual Industry Day to follow on March 6. A review of the Quarterly Release and Industry Day pilot is ongoing, and results assessing the pilot project will be included in OSFI’s 2025 Annual Risk Outlook.
Code of Conduct
The Code of Conduct for the Payment Card Industry in Canada – a voluntary Code adopted by all payment card network operators in Canada that ensures that merchants benefit from certain rights and protections in connection with their payment card processing arrangements – was overhauled by the federal Department of Finance in 2024. The first phase of changes took effect on October 30, 2024, including changes to disclosure box templates and complaints handling timelines. A second phase of changes, involving fee notification periods and application and statement disclosure requirements, will take effect on April 30, 2025. The second phase of changes requires significant systems changes for many entities that provide payment processing services, making the timeline extremely challenging.
Quebec’s Bill 72
Quebec’s Bill 72, An Act to protect consumers against abusive commercial practices and to offer better transparency with respect to prices and credit, introduced on September 12, 2024, and assented on November 7, 2024, introduces new consumer protections to prevent credit abuse, refund consumers for unauthorized or fraudulent transfers and limit consumer liability to C$50. Additional measures target open credit, introduce a new licensing requirement and clarify suggested tips on payment terminals, further tightening consumer rights in the province.
Certain measures took effect immediately on November 7, 2024, including those impacting specifically regulated contracts (which include consumer loans) executed in electronic form. Such measures included the requirements to obtain consent from the consumer to execute the contract in electronic form and to provide the consumer with a copy of the contract immediately upon its execution in a form that can be easily retained and printed, as well as the prohibition against the inclusion of hyperlinks and other forms of external clauses.
The prohibition on “door-to-door” sellers proposing and having consumers execute consumer loans or leases to finance the purchase or the lease of goods, other than in the limited circumstances provided for by regulations, also took effect immediately on November 7, 2004. The remainder of the Bill will come into force in accordance with a staggered schedule.
For more information on these developments, please contact any member of our Financial Services Regulatory group.
