Canadian financial institutions will be prohibited from charging more than $10

Canadian financial institutions will be prohibited from charging more than $10 in non-sufficient funds (NSF) fees, following a government cap on these charges.

NSF fees are incurred when there are insufficient funds in a customer's account to cover a pre-authorized payment or check. According to government estimates, NSF fees at Canadian banks typically range from $45 to $48. The new regulation will take effect on March 12, 2026, as stated in a government brief.

These amendments to Canada's Financial Consumer Protection Framework Regulations will also prevent financial institutions from charging an NSF fee more than once within two business days for the same personal account, or if the overdraft amount is less than $10. The reduced NSF fees will only apply to personal accounts, excluding business accounts. The government anticipates that these changes will result in a reduction of $4.1 billion in NSF fees over the next decade. Initially, a draft proposal in November 2024 suggested requiring banks to notify customers at least three hours in advance of an impending NSF fee. However, this requirement was removed based on feedback from financial institutions, who indicated that implementing such a system would be expensive and take 12 to 18 months. The Department of Finance reported that there were approximately $15.8 million in NSF transactions in 2023. It also noted that around 34 percent of Canadians are expected to incur NSF fees each year, predominantly affecting those with low incomes or difficulties in managing their "financial commitments." The Canadian Bankers Association (CBA) argued that NSF fees promote responsible banking practices. They advised customers to avoid these fees by regularly monitoring their account balances, setting balance alerts, and utilizing overdraft protection services. The CBA assured that banks would adhere to the new regulations by the effective date. The Finance Department highlighted that NSF fees disproportionately affected low-income Canadians and contributed to cycles of debt. A recent Equifax report indicated that the number of Canadians struggling with debt and missed payments increased from 2023 to 2024. "Younger and lower-income Canadians are facing missed payments on credit cards, auto loans, and lines of credit, indicating financial distress within these demographics," the report stated on February 25. According to Equifax data, Canadians aged 26 to 35 have the highest debt delinquency rate at 2.24 percent, while those aged 18 to 25 have a delinquency rate of 1.92 percent. For the overall population, the delinquency rate stands at 1.53 percent.

An Ipsos report found that 43 percent of Canadians feel they need assistance to manage their debt. Additionally, 36 percent reported being unsure of how to get out of debt or whom to approach for help, marking a 6 percent increase since 2019. This article also includes contributions from The Canadian Press.