Ottawa has put in place new rules limiting the fees banks can levy on customers who don’t have enough in their accounts to cover a cheque or other pre-authorized charges.
The updates, included in an order-in-council last week (March 12), cap non-sufficient funds fees at $10 for personal deposit accounts, prohibit charging more than one NSF fee in a period of two business days, and prohibit charging an NSF fee when an account shortfall is under $10.
The Finance Department said Wednesday that the changes will take effect starting March 12, 2026.
The government announced in the budget last year that it would reduce the fees, which currently run close to $50 at major banks, saying they disproportionately affect low-income Canadians and people with poor credit history.
Customers have sometimes seen high charges for being only pennies short. In a class-action lawsuit settlement against TD Bank Group last year, the lead plaintiff had been charged $96 for being 45 cents short on a PayPal bill after the merchant tried to put the purchase through twice.
One-third of Canadians pay an NSF fee in any given year
While there’s limited data on NSF fees, the federal government said last year that it estimates the proposed changes represent a $5.1 billion benefit to consumers over 10 years, and a $4.8 billion cost to banks, based on net present values.
It also estimated that banks charged NSF fees on a total of 15.8 million transactions in 2023, and that about a third of Canadians get hit with an NSF fee in any year.
Debit purchases aren’t generally subject to the fee because such transactions are rejected if there isn’t enough money in the account.
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How to avoid NSF fees
The Canadian Bankers Association said in a statement that the fees encourage responsible banking behaviour, and that to avoid the fees, customers can regularly monitor their account balances, set up balance alerts, and consider overdraft protection services.
It said that with the regulations finalized, banks will focus on making the system and process changes needed to comply by the start date.
There were some changes to the final rules from those proposed, including shortening the period when a consumer can’t be charged twice to two business days from 72 hours.
A proposed rule to require a warning to customers about a potential charge and to give a grace period to fix the problem appears to have been dropped, as was a requirement that banks disclose statistics on the fees such as total revenue and total number of NSF fees charged.
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