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How Changes To the Banking Industry Will Impact Canadians

Written by:
Personal Finance Writer

Last year, Ottawa announced new measures in the financial services industry. Canadians should be aware of the changes that will take place in 2024. Find out the impacts of HSBC’s takeover by RBC and new steps to help protect Canadians from the big banks. Plus we’ll explore the ongoing pressure to launch open banking in Canada, and the new limits proposed for predatory lenders. 

Some of the new procedures will create a positive influence on debt loads—while others may have a negative impact. In this article, we’ll share tips on what to look out for and what you can do to either mitigate or take advantage of these impending changes. 

RBC’s big merger with HSBC Canada reduces competition

Recently, the federal government approved HSBC’s buyout by RBC for $13.5 billion. Although HSBC is a global company, it only makes up 2% of the Canadian market share, according to Reuters. The anticipated completion date will take place in the first quarter of this year. 

Critics say that this will reduce competition within the banking industry. Environment, anti-monopoly groups, and conservatives are concerned about the growing concentration of the banking industry. They say that reduced competition means higher fees passed onto Canadians. This will be more challenging for consumers to find competitive offers and may face higher fees. 

To avoid paying higher fees, it’s still beneficial to shop around. See if another financial institution, credit union or mortgage broker can offer you the same product or service with lower fees or provide incentives such as a welcome bonus offer.

Government introduces ways to protect consumers at their banks 

The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced new measures, in the Fall of 2023, to ensure that financial institutions are treating Canadians fairly. She stated, “Whether it is ensuring Canadians have access to high-quality, affordable banking options and are not subjected to unfair fees, or making sure they receive the mortgage relief they need, our government will continue working to ensure Canadians are being treated fairly by their banks.” 

The four specific measures include: 

  1. Asking the big banks to abide by the federal government’s new mortgage guideline issued by the Financial Consumer Agency of Canada (FCAC). This aims to provide relief to Canadians experiencing financial struggles and carrying a mortgage.
  2. Making low-cost and no-cost bank accounts from the big banks more accessible and affordable for Canadians. Typically, these have been available to only students and older Canadians.
  3. Clamping down on junk fees, in particular non-sufficient funds (NSF) fees charged by banks. This tends to target those who have low income or carrying debt.
  4. Appointing the Ombudsman for Banking Services and Investments (OBSI), who will serve as the sole external complaints body. That means, for the entire banking industry, any Canadian who wishes to submit a complaint about their banking experience will go through this organization. 

If you’re facing mounting debt, be sure to check the bank fees you pay each month. Also, talk to your bank and ask them to waive certain fees for you for a period of time.  If you’ve been a loyal customer for several years and have many products with them, they may offer discounts to keep you around. 

Be sure to keep an eye out for low-cost or no-cost bank accounts entering the market that you may not have qualified for before. If your service provider doesn’t budge, consider switching to a digital bank as they tend to have lower fees compared to the big banks. 

Calls for action to make open banking available in Canada 

Open banking (also known as consumer-led banking) which is available in Australia and the UK, is not yet a part of the banking industry in Canada. Simply put, open banking will allow Canadians to safely share their financial data with fintech companies. This will enhance the user experience when using financial apps and software programs. 

The federal government plans to introduce new legislation for open banking in the 2024 budget. Thus, making it easier for fintech companies to enter the market and compete with the big banks. Doing so will foster new innovations and tools to help consumers manage their finances. You may even be using some of these financial apps already, such as budgeting apps. 

Last October, fintech companies launched a public campaign to pressure the federal government. Their goal is to have the federal government take swift action on improving the financial system and modernizing payment services which have been at a standstill for years. As a consumer, you can choose to join the campaign to tell Ottawa to upgrade the banking industry’s financial system, reduce fees and put more money back into your pockets.

Placing limits on predatory lending 

If you’ve ever been in a hurry to get quick cash, you may have resorted to payday loans (run by predatory lenders). What most users don’t realize is that they are an expensive way to borrow money. In last year’s budget, the federal government announced that it would lower the criminal interest rate that lenders could charge. The 47% annual percentage rate (APR) will be lowered to 35% APR. The government also proposed limiting the cost of borrowing a payday loan to $14 for every $100 borrowed instead of the current $17.

It’s wise to avoid using payday loans at all costs, especially if you’re in debt. Instead, build up an emergency savings fund. So that when an unexpected situation occurs, you have a cash cushion that you can rely on. Start out by setting aside small amounts. Then, gradually increase your contributions. This will help to motivate you to grow your emergency savings account. 

Another option is to call your lenders, such as your credit card provider to ask for extra time to pay off your loans. By explaining the struggles you’re facing, they may give you some leniency so you feel some financial relief.

Taking steps forward to improve your finances 

Now you know what’s in store for the coming year and how it will impact your banking experience. This way, you can start making changes to your everyday finances so that you can come out ahead. You can do this by negotiating with your service provider to lower your fees and interest rates. Or by switching financial institutions, or starting an emergency savings fund. Ultimately, you have all the tools and resources available to you to take action. 

If you’re looking for tailored advice on how to get out of debt, our team of expert credit counsellors is here to help. Contact one of them today to get started.

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