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Financial Literacy: Financial protection tools

Written by:
Staff Writer

This November, we’re celebrating Financial Literacy Month. So far we’ve discussed financial emergencies, debt management, and long-term saving plans. This final week, we’re discussing financial rights. We’ll examine what financial protection is available for Canadians. Knowing your legal rights is important and can help if you are dealing with financial challenges.

Here is an interesting fact:

According to Bloomberg, 56% of Canadians find it difficult to talk about their finances with their loved ones. That leaves the majority of Canadians in a very vulnerable situation. That is a huge gap in the resources we come to rely on when we’re struggling. Talking with someone about what’s going on can remind us that we are not alone or even lead to a solution. For example, financial protection is a lesser-known topic. It’s only through a conversation with a friend that someone struggling might even learn they exist.

In this article, we’re going to close the gap by reviewing financial rights and peer into the organizations in charge of protecting them so you’ll know what to do should the need arise.

As we go through the financial protection tools available, we’ll continue to use our fictional character, Sarah Anderson, as an example.

Here are Sarah’s stats:

Emergency fund

FAIR Canada

FAIR Canada is a nonprofit organization created in 2008. Their goal is to support and advocate for the rights and fair treatment of Canadians in the investment industry. They provide learning and support to help investors make sensible choices about their investments.

FAIR Canada’s chief aim is to educate investors about their rights. This nonprofit takes these steps to advocate for investor rights and safety:

  • Encourage investors to make wise decisions and understand their responsibilities
  • Connects with regulators and policymakers to promote laws that are helpful to investors
  • Address issues that may influence the wishes of investors
  • Fights for openness in the investment industry

While FAIR Canada advocates for the rights of Canadian investors, it can’t enforce rules and regulations. This means, that if someone wants to invest money in the Canadian investment industry, it’s best that they take some time to learn about their rights.

Financial Consumer Agency Canada

The Canadian government created the Financial Consumer Agency of Canada (FCAC) in 2001. The agency’s purpose is to safeguard and educate Canadians about financial services. Here are a few of their responsibilities:

Monitor and enforce that financial institutions are following regulations

Take and process complaints made by consumers about financial institutions

Educate Canadians about their rights when it comes to dealing with financial institutions

Advocate for new relations and policies to reflect the current market

Ensure businesses are protected by enforcing clear and accurate information from credit card issuers

With the FCAC’s guidance, Canadians can make intelligent choices that align with their financial goals.

Collection Agency Act

A collection agency collects debts on behalf of another company. The Collection Agency Act is a set of rules and practices that govern how a collection agency operates.

While each province has their own version of a collections agency act, they each have similar rules and regulations collection agencies must follow when collecting debt. Some of them include:

  • What days of the week and times they can call to collect
  • What information they can request
  • Who they can contact
  • Adhere to certain requests. For example, formal notice of the amount due and pertinent dates.

If you are contacted by a collections agency, don’t answer any questions before familiarizing yourself with your province’s regulations.

Canadian Deposit Insurance Corporation

Imagine a world where Sarah’s bank has to close permanently and her money goes along with it. Sounds stressful, doesn’t it?

Luckily, you don’t live in Sarah’s world. If your bank shuts down, the Canada Deposit Insurance Corporation (CDIC) can protect your money.

What is the CDIC?

The CDIC was created on May 4th, 1967, and serves a vital role in the financial system. This corporation ensures that bank customers keep (at least) some of their deposits if a bank fails or closes. CDIC ensures that up to $100,000 of your funds in each category at each member institution you deal with is protected. This includes:

  • Chequing and savings accounts
  • RRSP
  • RDSP
  • TFSA
  • RRIF
  • RESP
  • FHSA
  • Deposits held in Trust

That being said, it’s important to be aware that CDIC doesn’t insure all types of accounts. The CDIC doesn’t cover these things:

  • Mutual funds
  • Stocks
  • Bonds
  • Cryptocurrency
  • Loss because of theft
  • Foreign currency deposits

Major banks such as Scotiabank, CIBC, and TD are members of the CDIC. However, it’s crucial to understand that not all banks in Canada are CDIC members. To find out if your bank is a CDIC member, talk to a bank representative or hop on the CDIC website to see a complete list of member organizations.

Payday Loan

A payday loan is a short-term loan with an extremely high-interest rate. The repayment schedule is arranged around when the borrower is paid.

While it may seem like a good idea to get a payday loan for various short-term needs, it’s not always the case. We’ll show you why you should reconsider getting this type of loan using our fictional profile, Sarah Anderson. Let’s say she doesn’t have the cash to pay her $300 student loan payment. She decides to get a payday loan so she doesn’t default on the payment. Generally, a loan could easily incur $51 in fees. That’s the same as an annual interest rate of 442%. A fraction of a high-interest credit card at 23%.

If you’re thinking about getting a payday loan, you must learn about your rights as a borrower. Like the collection agency regulations, each province has their own rules governing payday loans.

Here are some of the most common borrower’s rights:

  • The number of times a payday lender can contact you and who else they can contact.
  • The percentage of income they are allowed to lend.
  • How much lenders can charge. Most provinces don’t allow higher than $15 – $17 per $100 borrowed.

Final Thoughts

Thank you for joining us in celebrating Financial Literacy Month. We hope we’ve answered questions you may have had about your financial rights. We also hope you can find comfort in the fact that there are authorities upholding those rights.

If you’re in debt and have been inspired to take control of your finances after reading these Financial Literacy Month articles, the experts at Consolidated Credit can help. Contact us today to find out how.

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