When a bank account has insufficient funds and payments such as checks or automatic withdrawals cannot be processed, banks charge customers a fee called a “non-sufficient funds (NSF) fee.” A new cap rule on these NSF fees, established by the Canadian government, came into effect on March 12th.
Under the new rules, the maximum NSF fee will be reduced from $50 to $10. Additionally, banks cannot charge NSF fees to a single account multiple times within two business days. Furthermore, banks are prohibited from charging NSF fees if the account balance is less than $10.
Federal Finance and Revenue Minister François-Philippe Champagne stated, “A $5 shortfall in a payment can result in a $50 NSF fee. That money could otherwise be used for things like food or medical expenses,” adding that lowering NSF fees would strengthen consumer protection.
According to a government news release, approximately one in three people pay NSF fees annually, which is an excessive burden, especially for those struggling to make ends meet each month. The new measures are expected to reduce the burden by approximately $600 million annually.