Overdraft fees lowered in Canada, prompting blowback from banks

Federal authorities have capped non-sufficient funds fees at Canadian banks, but banks have attempted to fight back.

In the Canadian financial system, non-sufficient funds (NSF) fees are a standard practice that charges customers a fee if they overdraw their bank account.

At big banks such as RBC, TD, and Scotiabank, NSF fees can reach $50 per case and stack up on repeat automatic withdrawals, resulting in a lump sum of charges that leave struggling Canadians deeper in the red than before.

However, correspondence from the federal government via the Department of Finance stated that these charges are now capped at $10 as of March 12, to support Canadians maneuvering a cost-of-living crisis, high housing costs and complications caused by the ongoing trade war with the U.S.

These changes were also implemented right before today’s (March 16) announcement from Statistics Canada that inflation is now hovering at 1.8 per cent, adding further relief to many across the country struggling to make it month to month.

“Even if someone is just $5 short when paying a bill or covering a cheque, they can be hit with a non-sufficient funds fee as high as $50. That’s money that could otherwise go toward groceries, medicine, or other everyday essentials. And this isn’t uncommon—more than one in three Canadians are affected by these fees,” François-Philippe Champagne, Minister of Finance and National Revenue, said in an official statement.

Here in the GTA, those maneuvering fees have been trying to make their voices heard for some time, as ACORN, a group that organizes on behalf of low to middle-income Ontario residents, has spent years trying to get the feds’ ear on this matter.

Now that the $10 cap is in effect, representatives within the organization have relayed that this will help Canadians save upwards of $600 million annually in fees — and even more down the line.

“We’ve been campaigning on this for, more or less, close to a decade. We demanded the federal government crack down on this, as it’s just pure profit for the banks. Now that this has been capped, this will, over the next 10 years, save moderate-income individuals upwards of $4 billion.” Tanya Burkart, leader of the Peel Region ACORN division, told INsauga.com.

Burkart noted that, in the world of finance, NSF transactions are often referred to as ‘junk fees,’ offering little to no value to the end user (and allegedly) exist only to line the pockets of financial institutions.

Federal oversight is now implementing several strategies to protect citizens facing pressure, as, alongside the new NSF fee cap, cheque hold amounts have been raised, granting easier access to newly deposited funds, and banks cannot impose more than one NSF fee within 48 hours.

“It’s a real win for people who are low or moderate income; it’s a chance to essentially keep every dollar they have, especially as it gets harder to keep their heads above water. It’s their money, it’s not a form of credit, or anything else in that vein, it’s money Canadians have already earned — so this is a real win for Canadians as a whole,” says Burkart.

However, according to correspondence from ACORN, advocacy for better banking was allegedly lobbied against by Canada’s big banks.

These included the removal of NSF fee stacking and public disclosure on behalf of banks every month, revealing how much money has been accrued through NSF fee implementations.

INsauga.com reached out to the Department of Finance to gain information on the relationship between banks and consumer advocacy groups during the process of delegating these changes.

Based on data from the Canada Gazette, the internal publication for federal channels, bank groups lobbied against the original 72-hour timeline of fee stacking, reducing it to its current 48-hour window, and the requirement for banks to ensure customers a three-hour alert that NSF fees were on the way.

Those involved in consultation on the side of the banks included the Canadian Banking Association (CBA), the Toronto-Dominion Bank (TD), the Royal Bank of Canada (RBC), the Canadian Imperial Bank of Commerce, Scotiabank, and the National Bank of Canada, according to the Canada Gazette.

“I mean, those actions really put their intentions out there for everyone to see, and I think that should be very disconcerting for banks,” adds Burkart.

As a result of dual consultation between consumer and financial advocacy groups, INsauga.com reached out to the Canadian Banking Association (CBA) to gain insight into the nature of their input throughout the consultation process, to which they responded via email “The Canadian Bankers Association engages regularly with governments and regulators through consultations to share the banking sector’s perspective and provide practical insights that support effective, evidence‑based regulation.”

The CBA continued to note that they promptly responded to the federal amendment and adjusted to the new $10 overdraft fee standard.

With these changes now in effect, inflation rising, and a trade war with seemingly no end in sight, advocacy groups like ACORN are likely to continue fighting for Ontarians living from paycheque to paycheque.

However, as advocacy only goes so far, it remains to be seen what the feds will do further down the line to help, as costs go up, and national banks lobby against too much change too fast.

“The Government of Canada has taken significant actions to make life more affordable for Canadians,” a Department of Finance official told INsauga.com via an emailed response. “The Government will launch automatic federal benefits for the 2026 tax year that will reach up to 5.5 million low-income Canadians by the 2028 tax year. To make filing simpler and more automatic for millions of lower-income Canadians.”

Additional incentives include the upcoming Canada Groceries and Essentials Benefit, which builds on the GST credit, as well as automatic federal benefits for the current 2026 tax year, set to reach up to 5.5 million low-income Canadians over the next two years.

Between these incentives and ACORN’s own continued advocacy, figures like Burkhart believe that interests (for now) align between the feds and struggling citizens, stating, “In the coming months, Canada is fighting for fair banking, and we are going to continue to focus on its impact.”