Non-sufficient funds fee will be limited to $10 in Canada starting next year
Former Prime Minister Justin Trudeau’s government made a significant decision in its final days in office to provide relief to Canadians when it comes to banking fees. The government issued an order-in-council on March 12, just two days before Trudeau resigned, capping non-sufficient funds (NSF) fees that banks can charge customers.
Under the new regulations, banks will not be allowed to charge more than $10 if a customer’s account does not have enough funds to cover a cheque or pre-authorized debit. This is a significant reduction from the typical NSF fees of $45 to $48 per transaction that most banks charge. The regulations also prohibit banks from charging NSF fees more than once within a two-business day period, especially if the overdraft amount is less than $10.
The government estimates that these measures will reduce NSF fees charged by Canadian banks by $4.1 billion over the next 10 years. Finance Department spokesperson Marie-France Faucher explained that the decision was the culmination of a process that began with consultations with consumer groups and banks in 2023, leading to announcements in the 2024 budget and fall economic statement.
While the Canadian Banking Association initially defended NSF fees, they have committed to complying with the new regulations. The association’s media relations manager, Maggie Cheung, emphasized that NSF fees encourage responsible banking behavior and help maintain the integrity of the payment system. She also recommended that customers monitor their account balances regularly, set up balance alerts, and consider overdraft protection services to avoid these fees.
Alejandra Ruiz Vargas, president of ACORN Canada, expressed her excitement over the government’s decision to cap NSF fees, which disproportionately affect low-income Canadians. Vargas highlighted the financial burden that NSF fees impose on individuals who may only be a few dollars short on a payment. She praised the government for finally addressing these concerns and providing hope for those impacted by high fees.
While ACORN would have preferred a complete ban on NSF fees, the Finance Department explained that a $10 cap was chosen to strike a balance between consumer protection and incentivizing timely payments. The department’s regulatory impact assessment revealed that NSF fees affect a significant portion of Canadians and contribute to financial hardship, particularly for vulnerable groups.
The new regulations will apply to 79 financial institutions across Canada and are set to take effect on March 12, 2026. While a draft version of the regulations initially included an obligation for banks to alert customers before incurring an NSF fee, this requirement did not make it into the final regulations. Details of the new regulations will be published in the Canada Gazette on March 26, providing transparency and clarity for consumers.
