Potential new banking rules could give landlords and contractors speedier access to funds deposited by cheque. The Canadian government is seeking input on the regulated timelines that, in some cases, give banks up to eight business days to clear cheques and release funds to payees.
The opportunity to comment is part of a broader public consultation on Canada’s financial sector, which is considering a range of measures related to competitiveness, consumer protection, oversight and risk abatement. A newly released discussion paper presents “potential proposals” arising from two earlier consultation exercises, occurring in the fall of 2023 and the winter of 2024.
The rules enabling holds on cheques are set out in the federal Bank Act and were last updated in 2012. When a bank employee administers a cheque deposit, payees can expect the full release of funds (in Canadian dollars) four business days later for cheques of up $1,500 or seven business days later for cheques of greater amounts. However, an extra day is added before clearance if the cheque is deposited via an automated teller machine (ATM) or a bank’s mobile app.
In the interim, depositors can obtain up to $100 of the amount at the time that a bank employee processes the cheque or one day later if it is deposited through an automated service. The federal consultation is now considering the appropriateness of both the holding period and the $100 threshold for earlier release of funds.
“While Canadians are using cheques less often than in previous decades, cheques are still an important form of payment for many, with over 400 million used in Canada in 2022,” the discussion paper states. “Bank systems have become more sophisticated over time, allowing cheque funds to clear faster.”
Although existing rules reinforce the primacy of in-branch service, the discussion paper acknowledges physical bank branches are becoming scarcer. It’s suggested that banks might be required to disclose more information about their rationale for closing retail branches and/or potentially be restricted from applying transfer surcharges for affected branch patrons who choose to move their accounts to other financial institutions still operating in the vicinity.
As well, it’s proposed that data disclosure requirements could be expanded to mandate more information about banks’ retail branch operations, including the average volume and value of annual transactions. “More detailed publicly available data on branch closures would enable the public, as well as regulators, policy-makers, and researchers, to better understand how banks make determinations about what branches to maintain and how communities are impacted by branch closures,” the discussion paper states.
The public can submit comments on any or all of the discussion paper’s considerations until September 11, 2024.
