Banks' NSF Fees Capped at $10

Summary#

The Government of Canada published a proposal on November 16, 2024 to change the Financial Consumer Protection Framework Regulations (under the Bank Act) to limit bank non‑sufficient funds (NSF) charges and require banks to give customers a short chance to cover a payment before charging a fee. The Department of Finance estimates benefits of $5.1 billion and costs of $4.8 billion over 10 years, for a net present‑value benefit of $314.4 million.

What it does#

This is a proposal (not yet law). Key changes the draft rules would make:

• Cap NSF fees at $10 per instance (current typical fees are about $45–$48).
• Stop a bank from charging more than one NSF fee to the same person within 72 hours.
• Ban NSF fees when the account shortfall is under $10 (the payment can still be declined).
• Require the bank to send an electronic alert and give at least a three‑hour grace period (alerts sent during normal business hours) so the customer can deposit or transfer money to avoid the fee.
• Require each bank to publish, on its website, yearly figures within 30 days after year‑end on: number of NSF fees charged, number of customers charged (and those charged four or more times), and total NSF revenue — and keep that information available for three years.
• Apply to personal deposit accounts of individuals at banks governed by the Bank Act. The changes would not cover business accounts or fees charged by merchants (merchant dishonoured‑payment fees) or provincially regulated credit unions.

If finalized, the cap would take effect one month after the final rules are registered; the other measures would start six months after registration.

Who's affected#

• People with personal bank accounts who pay by cheque or pre‑authorized debit (PAD). The government estimates about 15.8 million NSF transactions in 2023 and that roughly 34% of Canadians incur an NSF fee in a year. Those most likely to benefit are lower‑income people and groups overrepresented among those struggling financially (for example, women, lone‑parent families, recent immigrants, and Indigenous peoples).
• Banks regulated under the Bank Act — roughly 80 institutions (including Schedule I, Schedule II and authorized foreign banks). The six largest banks currently account for about 97% of retail service‑charge revenue and would bear most of the industry cost.
• Businesses, merchants and provincially regulated credit unions are generally not covered by these proposed rules. The proposal notes only 3 federally regulated credit unions exist and the rules would not be extended to provincially regulated credit unions.

Why it matters#

• For consumers: the changes aim to reduce sudden, large fees that can worsen financial hardship and trigger further missed payments. The alert plus short grace period gives people a real chance to avoid a fee when they can top up an account quickly.
• For vulnerable households: the proposal targets a fee that research and advocates say disproportionately harms people with low or unstable incomes.
• For banks and the market: it would cut NSF fee revenue sharply (the Department estimates reduced NSF revenue of about $4.8 billion in present value over 10 years) and could lead banks to adjust other fees or services in response.
• For transparency and choice: annual public reporting by banks would let consumers and advocates better see how many fees are charged and how much revenue they generate.
• Next step: this is a consultation‑stage proposal. Comments are invited within 30 days of the Canada Gazette publication (deadline: December 16, 2024).