Regulation - LGIC
Public consultation on new regulations to support the new Credit Unions and Caisses Populaires Act, 2020 (CUCPA 2020), a principles-based, modernized framework aiming to reduce burden and encourage innovation, while also improving consumer protection.
Regulation Number(s):
N/A
Instrument Type:
Regulation - LGIC
Bill or Act:
Credit Unions and Caisses Populaires Act, 2020
Summary of Proposal:
The Ministry of Finance (MOF) is seeking feedback on regulations to support the new Credit Unions and Caisses Populaires Act, 2020 (CUCPA 2020).
Three regulations would support the new Act:
1. The Cost of Borrowing and Disclosure to Borrowers regulation under the CUCPA 1994 (currently O. Reg. 238/09) is harmonized across sectors and with other jurisdictions in Canada. MOF intends to make a regulation under the CUCPA 2020 with no substantive differences from O. Reg. 238/09.
2. General Regulation: The attached General Regulation (O. Reg. 237/09) is replicated and updated to reflect changes in the CUCPA 2020. MOF is proposing that many of the existing provisions in the General Regulation remain status quo and migrate over to this new regulation, while others be updated, moved to one of FSRA's proposed Authority Rules (i.e. the Sound Business and Financial Practices Rule; Capital Adequacy Rule; and Liquidity Adequacy Rule), or not be carried forward. Proposed changes include updating and removing outdated regulations on interest rate risk management, capital and liquidity, and investment and lending, and adding new sections concerning governance and capital structure.
3. Sale of Insurance: Sections 35 to 43 of O.Reg 237/09 allow credit unions and caisse populaires to administer and promote certain types of incidental insurance. This will not change.
As announced in the 2020 Fall Budget Bill, the government intends to allow credit unions to work with licensed insurance agents, brokers and companies to provide additional types of insurance in branch and online, with provisions to protect consumers. The parameters of the new regulations are outlined below:
• Limitations on the type of insurance: The sale of insurance in credit unions will include all types of insurance, except that life and accident and sickness insurance (as defined under the Insurance Act) will only be included where they are incidental to a permitted policy.
• Promoting Insurance: Credit unions would be able to promote insurers, agents, and brokers, regarding permitted insurance and promote permitted insurance products in branch and online.
• Location: The sale of insurance could occur in credit union branches and online through an insurance broker, agent, and insurer. However, the operations of the insurance agent, broker and insurer must be clearly distinct from the credit union operations to ensure the customer knows who they are dealing with at all times.
• Referrals: Credit unions would be able to refer members to insurers, agents, and brokers.
• Sharing of Information: Consumer information must be stored separately and cannot be shared between the credit union and subsidiary or insurance partner.
• Insurance intermediary: The insurance may only be sold by a licensed insurance agent, broker, or insurer, who is not an employee of the credit union. Employees of the credit union will not be allowed to sell the newly permitted types of insurance.
• Tied Selling: A credit union and its employees cannot place undue pressure on a person to purchase insurance from a specific insurer, agent or broker or one of their affiliates. For clarity, undue pressure includes making such a purchase a condition for obtaining another product or service.
Three regulations would support the new Act:
1. The Cost of Borrowing and Disclosure to Borrowers regulation under the CUCPA 1994 (currently O. Reg. 238/09) is harmonized across sectors and with other jurisdictions in Canada. MOF intends to make a regulation under the CUCPA 2020 with no substantive differences from O. Reg. 238/09.
2. General Regulation: The attached General Regulation (O. Reg. 237/09) is replicated and updated to reflect changes in the CUCPA 2020. MOF is proposing that many of the existing provisions in the General Regulation remain status quo and migrate over to this new regulation, while others be updated, moved to one of FSRA's proposed Authority Rules (i.e. the Sound Business and Financial Practices Rule; Capital Adequacy Rule; and Liquidity Adequacy Rule), or not be carried forward. Proposed changes include updating and removing outdated regulations on interest rate risk management, capital and liquidity, and investment and lending, and adding new sections concerning governance and capital structure.
3. Sale of Insurance: Sections 35 to 43 of O.Reg 237/09 allow credit unions and caisse populaires to administer and promote certain types of incidental insurance. This will not change.
As announced in the 2020 Fall Budget Bill, the government intends to allow credit unions to work with licensed insurance agents, brokers and companies to provide additional types of insurance in branch and online, with provisions to protect consumers. The parameters of the new regulations are outlined below:
• Limitations on the type of insurance: The sale of insurance in credit unions will include all types of insurance, except that life and accident and sickness insurance (as defined under the Insurance Act) will only be included where they are incidental to a permitted policy.
• Promoting Insurance: Credit unions would be able to promote insurers, agents, and brokers, regarding permitted insurance and promote permitted insurance products in branch and online.
• Location: The sale of insurance could occur in credit union branches and online through an insurance broker, agent, and insurer. However, the operations of the insurance agent, broker and insurer must be clearly distinct from the credit union operations to ensure the customer knows who they are dealing with at all times.
• Referrals: Credit unions would be able to refer members to insurers, agents, and brokers.
• Sharing of Information: Consumer information must be stored separately and cannot be shared between the credit union and subsidiary or insurance partner.
• Insurance intermediary: The insurance may only be sold by a licensed insurance agent, broker, or insurer, who is not an employee of the credit union. Employees of the credit union will not be allowed to sell the newly permitted types of insurance.
• Tied Selling: A credit union and its employees cannot place undue pressure on a person to purchase insurance from a specific insurer, agent or broker or one of their affiliates. For clarity, undue pressure includes making such a purchase a condition for obtaining another product or service.
Analysis of Regulatory Impact:
The regulations are expected to reduce administrative costs and red tape for credit unions. It is not possible to accurately estimate the costs saved due to the size, complexity, and diversity of the credit union sector in Ontario.
Questions for affected entities:
1. Will your business experience cost savings as a result of the proposed regulations if it were implemented? If so, how much do you estimate you would save in the initial year of implementation and for every year following?
2. Will these regulations create any new costs for your business if it were implemented? If so, please estimate those costs for the initial year of implementation, and for the years following that first year.
Questions for affected entities:
1. Will your business experience cost savings as a result of the proposed regulations if it were implemented? If so, how much do you estimate you would save in the initial year of implementation and for every year following?
2. Will these regulations create any new costs for your business if it were implemented? If so, please estimate those costs for the initial year of implementation, and for the years following that first year.
Further Information:
General Regulations
Credit Unions and Caisses Populaires Act, 2020
Proposal Number:
21-MOF017
Posting Date:
November 24, 2021
Comments Due Date:
January 10, 2022
Contact Address:
Ontario Ministry of Finance
95 Grosvenor Street, 4th Floor
Toronto, ON M7A 1Z1
95 Grosvenor Street, 4th Floor
Toronto, ON M7A 1Z1