Non-sufficient funds fee will be limited to $10 in Canada starting next year

In one of its last acts in office, former Prime Minister Justin Trudeau's government decided to give Canadians a break at the bank.

According to an order-in-council dated March 12, two days before Trudeau resigned, banks won't be allowed to charge more than $10 if someone doesn't have enough money in their personal accounts to cover a cheque or a pre-authorized debit.

Most banks charge non-sufficient funds (NSF) fees of $45 to $48 per transaction if an account holder does not have overdraft protection, which typically comes with its own monthly fee.

Banks will also be prohibited from charging NSF fees more than once within a period of two business days and in cases where the overdraft is less than $10.

To avoid bank account holders accidentally incurring an NSF charge, banks will also have to send an alert giving account holders at least three-hours' notice that a payment exceeds their bank balance. If the account holder deposits money to cover the payment within that period, banks cannot charge the fee.

The new regulations will apply to personal and joint accounts but not to corporate or business accounts. They will go into effect on March 12, 2026.

The government predicts the measure will reduce NSF fees charged by Canadian banks by $4.1 billion over 10 years.

Finance Department spokesperson Marie-France Faucher said the order comes at the end of a process that began with a news release in 2023 as well as announcements in the 2024 budget and the government's 2024 fall economic statement.

"This work included extensive consultations with consumer groups and banks to ensure that the regulations provided sufficient protection for consumers while being technically feasible to implement," Faucher wrote in an emailed response.

The Canadian Banking Association, which defended NSF fees to the government, says its members will comply with the new rules.

"Now that the NSF fee regulations have been finalized by the Department of Finance, banks' efforts will be focused on making the requisite system and process changes to comply," said Maggie Cheung, media relations manager for the association.

Cheung said charging fees for payments that exceed bank balances helps Canada's banking system and there are ways to avoid them.

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