section 347(2)

INTRODUCTION AND BRIEF DESCRIPTION

This section sets a limit on the maximum amount of an overdraft charge that can be imposed by certain financial institutions in Canada.

SECTION WORDING

347(2) In this section, "overdraft charge" means a charge not exceeding five dollars for the creation of or increase in an overdraft, imposed by a credit union or caisse populaire the membership of which is wholly or substantially comprised of natural persons or a deposit taking institution the deposits in which are insured, in whole or in part, by the Canada Deposit Insurance Corporation or guaranteed, in whole or in part, by the Quebec Deposit Insurance Board.

EXPLANATION

Section 347(2) of the Criminal Code of Canada relates to the issue of overdraft charges, which are fees charged by a financial institution for creating or increasing an overdraft. In this section, the definition of "overdraft charge" is provided, specifically that it is a charge not exceeding five dollars and imposed by a credit union or caisse populaire whose membership is mostly natural persons, or by a deposit-taking institution whose deposits are insured in whole or in part by the Canada Deposit Insurance Corporation or guaranteed in whole or in part by the Quebec Deposit Insurance Board. The reason for the inclusion of this provision in the Criminal Code is to ensure that consumers are not being unfairly charged for overdrafts. The section limits the amount of the charge to $5, which is a reasonable amount and should not be considered as oppressive to those who have overdrafted their accounts. It is important to note that this section only applies to credit unions, caisse populaires, and deposit-taking institutions that meet the membership or deposit requirements outlined in the definition. Overall, this provision is in line with consumer protection measures and ensures that financial institutions are not exploiting customers who may be in a vulnerable financial situation. By providing a clear definition of "overdraft charge" and limiting the amount that can be charged, individuals are able to exercise greater control over their finances and avoid unfair charges.

COMMENTARY

Section 347(2) of the Criminal Code of Canada offers a definition of overdraft charge" within the context of regulating illegal interest rates charged by financial institutions. As Canadians have the legal right to access safe and fair financial services, it is important to ensure that financial institutions do not take advantage of vulnerable populations by imposing excessive fees. This section of the Criminal Code is significant because it helps to limit the potential for abusive situations between financial institutions and the clientele they serve. This subsection is particularly clear in its definition of an overdraft charge" as a fee not exceeding five dollars for the creation of or increase in an overdraft. This implies that financial institutions can impose an overdraft fee as long as it is within this limit, ensuring that the charges imposed on clients are fair and just. It is important to note that this subsection is not attempting to restrict the ability of financial institutions to impose charges, but rather to ensure that these institutions do not exploit their customers. The subsection also clearly identifies the kinds of financial institutions that are subject to the limitations of this law. It includes credit unions and caisses populaires whose membership is largely comprised of natural persons, as well as any deposit-taking institution that has deposits that are insured, at least in part, by the Canada Deposit Insurance Corporation (CDIC) or guaranteed by the Quebec Deposit Insurance Board (QDIB). This helps to create a clear standard for all types of financial institutions, ensuring that they are all held accountable to the same legal requirements. Given the significant changes in the financial sector in recent years, which have led to a significant increase in digital banking and the use of online financial services, it remains vital that Canadians remain vigilant to ensure that they are not subjected to financial exploitation. Having clear legal requirements such as the one provided under Section 347(2) encourages individuals to take necessary precautions when considering financial services and products. In conclusion, Section 347(2) of the Criminal Code of Canada provides a clear definition of overdraft charge," offering legal protection to Canadian citizens and holding financial institutions accountable. The legislation is structured to prevent any overexploitation or deception that could negatively impact customers, while still ensuring that financial institutions remain profitable and sustainable. This section of the Criminal Code is an example of how the government can regulate and protect its citizens through legal means.

STRATEGY

Section 347(2) of the Criminal Code of Canada provides the definition of an overdraft charge and sets a maximum amount of not more than five dollars that a credit union or deposit taking institution can impose for the creation or increase in an overdraft. Financial institutions must be strategic in adhering to this section of the Criminal Code to ensure they comply with the law and avoid any legal trouble. One strategy financial institutions can employ when dealing with this section of the Criminal Code is to review their policies and procedures. Banks and credit unions must evaluate and ensure they are not charging more than five dollars for overdraft charges. Ensuring that the institutions' policies and procedures are aligned with the Criminal Code will avoid any legal implications. Updating the policies and procedures will provide the institution with a competitive environment, where members or account holders will know that they are not being charged more than five dollars for overdraft charges, making the institution more attractive to individuals. Another strategy institutions can employ is training employees on to how to manage overdraft charges. Employees are often the first point of contact for account holders and must know how to address account overdrafts and properly calculate the charges if imposed correctly and legally. Training can help ensure that employees know the institution's policies and procedures around overdraft charges and can avoid any discrepancies between account holders about the charges imposed. Training will mitigate the risk of human error that may lead to legal complications. Financial institutions can also consider structuring their overdraft products to comply with this section of the Criminal Code. Structuring may involve setting account fees such that it is costly for the account holder to use the overdraft, therefore, minimizing the overdrafts usage. Alternatively, banks and credit unions can structure their overdraft products as revolving lines of credit, where the charges are more than five dollars, but the bank or credit union will redefine the product as a revolving line of credit with a higher interest rate rather than as an overdraft. This will ensure that the institution does not violate the Criminal Code and that the overdraft product is still accessible to account holders. In conclusion, compliance with Section 347(2) of the Criminal Code of Canada is essential for financial institutions to avoid legal trouble and protect their reputation. Strategically, banks and credit unions should review and update their policies and procedures, ensure employees are appropriately trained, and review the overdraft products they offer to minimize the risk of non-compliance with this section of the Criminal Code.