Vass Bednar: Canadians face glaring gap in banking protections
It is well-known that Canada is struggling to advance dual commitments to realize an overdue open banking system and modernize the payments system (often referred to as “PayMod” as an industry shorthand). Proponents of these innovations frequently remind regulators of the benefits these advancements promise to both citizens and innovative firms. Canadians need and deserve choice, along with robust digital architecture that facilitates the services for their various banking needs.
A laser focus on the potential of these policy developments misses a glaring gap: the financial sector has inconsistent consumer protection across the provinces. In a world in which only licensed banks provided all financial or bank-like activity, regulation in this space would be more straightforward and we could simply amend the Bank Act. But because there are so many complementary players and new ones constantly emerging, we will have to do more.
Consider Interac Corp.’s e-transfer liability — which is different from the standard followed by Visa Inc. and Mastercard Inc. When someone sends money with Interac, they are agreeing that Interac is not responsible for any losses or damages they may suffer as a result of the transaction. Thus, the transfer is not governed by “zero liability” protection rules. With credit cards, the merchant, not the consumer, eats the financial cost of fraud.
This situation is another instance of private actors writing the rules for a marketplace. A comprehensive federal retail payments oversight framework would have market conduct and consumer protection requirements, as the government presented in an old consultation paper. That proposal is overdue for more substantive attention from policymakers.
Over the past
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