Banks' NSF Fee Cap and Protections

Summary#

This is a proposed change to the Financial Consumer Protection Framework Regulations published by the Department of Finance on November 16, 2024. It would limit when and how banks can charge non-sufficient funds (NSF) fees — for example by capping NSF fees at $10, requiring short grace periods and alerts, and adding public reporting. The government’s analysis estimates $5.1 billion in benefits and $4.8 billion in costs over 10 years, for a net benefit of $314.4 million.

What it does#

• Caps NSF fees charged by banks to a maximum of $10 per declined cheque or pre-authorized debit.
• Prevents a bank from charging an NSF fee more than once to the same person within 72 hours.
• Stops banks from charging an NSF fee when the overdrawn amount is under $10.
• Requires banks to send an electronic alert (text or email) between 8:00 a.m. and 4:00 p.m. local time when a payment would create an NSF situation, and give the customer at least a three‑hour grace period to deposit or transfer funds to avoid the fee.
• Requires banks to publish, on their public websites, annual data on:
  • the number of NSF fees charged and the total revenue from them,
  • how many customers were charged, and
  • how many customers were charged four or more times. This report must be published within 30 days after the end of the calendar year and kept available for three years.
• Applies to personal deposit accounts of natural persons (including joint accounts). It does not apply to corporate or business accounts, merchant dishonoured-payment fees, or provincially regulated credit unions.

Who's affected#

• People with personal bank accounts who use cheques or pre-authorized debits. The department estimates about 16.1 million NSF transactions in its 2025 baseline.
• Low-income and financially vulnerable groups are likely to notice the biggest difference, including women, lone-parent families, recent immigrants, and Indigenous peoples, who the analysis says are over‑represented among those who incur NSF fees.
• About 80 federally regulated institutions would be covered (Schedule I and Schedule II banks and authorized foreign banks).
• Other parties — merchants, payday lenders, and provincially regulated credit unions — are not covered by these federal changes and could still charge their own dishonour fees.

Why it matters#

• For consumers: the change aims to reduce sudden, high banking penalties that can push people deeper into debt. A lower cap, limits on repeated charges, and a short warning period let people fix small shortfalls without paying a big fee. The government analysis predicts large financial savings for consumers over time.
• For banks: the rules would cut NSF revenue and create some one‑time and ongoing compliance costs. The analysis finds most of the costs fall on banks and most of the benefits go to consumers. Banks might respond by changing other fees or overdraft offers; the proposal notes this is possible but uncertain.
• For public oversight: regular, public reporting on NSF fees would give consumer groups, researchers and policymakers better data on how often these fees are charged and how much revenue they generate.
• Status and next steps: these are proposed regulations, not final. The Canada Gazette notice invites comments for 30 days after publication. If adopted, the cap would come into force one month after registration and the other measures would start about six months after registration.