The feds are going after one of the most hated banking practices: the charge customers get when they try to make a payment but don’t have enough in their account to cover it.
Driving the news: The federal government has enacted legislation imposing a $10 cap on banks’ non-sufficient fund (NSF) fees, starting March of next year. Currently, an NSF charge at one of Canada’s top banks is between $45 and $48.
- The feds have been working on this since 2023, and last year predicted that it would save Canadians $5.1 billion over 10 years.
Why it matters: NSF fees are more prevalent than you might think. Per Finance Department estimates, 34% of Canadians were hit with them in 2023, with banks issuing a total of 15.8 million NSF charges that year. If they cost $45 a pop at minimum, that’s at least $711 million out of customers’ pockets.
- What’s more, these fines primarily impact low-income Canadians, sometimes forcing them to seek out payday loan lenders to cover charges, and creating a debt cycle.
Zoom out: The feds have said previously that they aim to crack down on excessive banking fees. It’s an area Canada is, unfortunately, a world leader in. A report from last year found that customers of Canada’s Big Five banks paid $7.73 billion in extra fees compared to customers of British and Australian ones.—QH