B. The Regulation of Payment Systems

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 317-319

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The question of who may regulate derives from the question of which level of government in Canada has constitutional jurisdiction to regulate electronic funds transfer. This jurisdiction is not expressly set out in the Constitution Acts, but the answer must be the federal government, for a number of reasons: (i) the paramount and exclusive authority of Parliament over banking pursuant to section 91(15); (ii) the other provisions in the Constitution Act, 1867, which suggest a strong federal jurisdiction over payment methods, through sections 91(14), (16), (18), and (20), relating to currency and coinage, the issue of paper money, bills of exchange, and promissory notes, and legal tender; (iii) the jurisdiction of Parliament over trade and commerce pursuant to section 91(12) because payment systems are the circulation system for commerce and must necessarily be national in nature; and (iv) the general authority of Parliament in relation to matters of national importance, whether framed under section 91(10)(a), "other works and undertakings," the "peace, order and good government" power under section 91 or the residual power under section 91. This is not to suggest that there may be some overlap or conflict with provincial powers, especially under section 92(13) "property and civil rights," in relation to consumer or contract issues, but the national interest in a single federal regulatory regime in a matter as important as the payments system would suggest the overwhelming importance of a single, national regulatory regime.

Until the 1990s, there was virtually no Parliamentary oversight of the payments system. The Canadian Bankers’ Association and, after 1983, the Canadian Payments Association (CPA), were free to structure and run the payments system as they wished, although clearly with considerable input from their bank members and users. The CPA by-laws were subject to Governor in Council confirmation, OSFI conducted an annual examination, and the chair and vice-chair of the CPA board were drawn from the Bank of Canada, so it could be said that the payment system was conducted within a culture of suasion, although there was no formal statutory oversight.

However, in 1996, the Payment Clearing and Settlement Act (PCSA),⁵ was enacted by Parliament, and in 2001, the Canadian Payments Act was significantly amended to provide for greater oversight of the CPA by the Bank of Canada, the Minister of Finance, and OSFI. The struc-

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ture and governance of the CPA was considered in an earlier chapter.⁶

The focus of the PCSA is more specifically on oversight of the payments system itself and will be considered here.

The main purpose of the PCSA is to empower the Governor of the Bank of Canada...