Summary of public consultation feedback – Unclaimed Deposits Rule

KCCCU

CCUA

KCCU

DOCU

PEL

LCU

• Stakeholders noted that data retention for 40 or 100 years creates an unnecessary burden and increases risk of data loss and compromise for the CUs.
• Stakeholders suggested that the Guidance allow CUs to use their individual retention periods for destruction once the deposit and supporting material information has been accepted by FSRA.
• A stakeholder commented that CUs should only have to keep records for up to 7 years.
• A stakeholder requested that language be included in the Rule that CUs must retain all historical records of unclaimed accounts from the date of their opening and until the unclaimed accounts are passed on the Authority for administration.

• FSRA is proposing revisions to Section 3(7) of the Rule so that the requirement for CUs to maintain records is 10 years after the unclaimed deposits have been transferred to FSRA.

KCCCU

SCUL

• Some stakeholders requested clarification of FSRA’s expectation for remaining membership and investment shares that are held by CU members, and if the CU is expected to continue to track those funds after 10 years.

• Treatment of membership and investment shares is not within the scope of FSRA's Unclaimed Deposits regime. CUs should ensure that any shares continue to be treated in accordance with the CUCPA, 2020, and the CU's articles and by-laws.

SCUL

CCUA

• Stakeholders requested that FSRA confirm that registered products (RRSP, RRIF, TFSA, FHSA) are not considered as deposits and are not transferrable under the Rule.

• While registered products are included in the definition of ‘deposit’ under the CUCPA, 2020, given the unique nature of products such as RRSPs or RESPs, FSRA will not be collecting such deposits as part of the unclaimed deposits regime.
• Section 1(3) of the Rule has been revised to clarify FSRA will not be collecting such registered savings plans or funds.

SCUL

LCU

CCUA

DOCU

• Stakeholders requested that FSRA consider a minimum threshold for unclaimed deposits that would not be required to be transferred to FSRA. This would alleviate the need of having to transfer small dollar amounts that will more in internal resources than the transfer itself.
• A stakeholder suggested that FRSA establish a threshold at which sending notifications to members at 2,5 and 9 years would become mandatory to limit the compliance burden associated with this practice.

• Revisions are proposed to Section 1(3) of the Rule stating that the Rule does not apply to deposits equal to or less than $50.

LCU

CCUA

• Youth accounts under the new rule may become inactive on a regular occurrence due to various factors (e.g. youth not using account or cash frequently, account set up by parents but not used by child). Stakeholders requested a carve out for youth accounts under the age of 18 from the Rule to help ease administrative burden.

• No changes are proposed. Transferring these deposits to FSRA will allow depositors to access their deposits later in life and protect deposits from being eroded by fees.

LCU

CCUA

• Stakeholders requested clarification on when the 10-year inactivity period starts for term deposits, and how to treat auto-renewing term deposits.
• Some stakeholders suggested that CUs should be able to determine on a case-by-case basis whether auto-renewing term deposits trigger activity of a member, and thus restart the 10-year period for unclaimed deposits.

• Section 2(7) of the Rule has been revised to propose that immediately before making a payment to FSRA, the CU shall convert the value of the deposit to a cash amount equal to principal plus interest on the unclaimed deposit. CUs would therefore be required to transfer the principal and any interest on a GIC to FSRA as the same time as it transfers any other unclaimed deposits for the same depositor.
• The Guidance has been updated to clarify that automatically renewing a term deposit does not itself constitute a transaction that would interrupt a period of inactivity.
• The Guidance has been updated to clarify that when a deposit becomes unclaimed before it reaches maturity, the CU will pay the accrued interest up to the date it becomes unclaimed without charging early termination fees and transfer the full principal and earned interest.

LCU

CCUA

DOCU

• Some Stakeholders suggested that the Rule allow CUs to continue to charge fees for any unclaimed deposit accounts where FSRA denies the transfer of funds due to lack of information.
• CCUA suggested that a principles-based approach would allow CUs to use internal processes/policies to continue to manage/hold the funds to support the member in potentially returning for those funds.
• With respect to the suspension of fees on an inactive account that becomes an unclaimed deposit, a stakeholder suggested that it would be beneficial to allow some latitude in the management of inactive accounts, thereby making it possible to determine the most advantageous approach for members, while considering the specificities of each file, until the unclaimed deposits are sent to the FSRA.

• Section 2(9) of the Rule provides that no fees shall be charged, and no interest paid on a member’s account once the account has become unclaimed.
• This has the effect of treating the unclaimed deposit in a consistent manner whether it has been transferred to FSRA or not. This would achieve the same principle of protection of consumer deposits regardless of where they are held.
• No changes are proposed.

LCU

CCUA

• Stakeholders have requested a reasonable implementation period to ensure that there is sufficient time to meet the Rule and Guidance requirements.
• The CCUA requested a minimum of two years once the Rule is approved as appropriate transitional time for CUs to prepare, build systems, and implement the rule.

• Sections 8(2) and 8(3) of the Rule has been revised to propose a 24-month transitional period following the coming into force date.
• No changes are proposed.

PEL

• Stakeholder noted that the Rule does not address treatment of unclaimed deposits of CUs that are wound up.

• Deposits that have not met yet the 10-year mark are not considered unclaimed deposits.
• CUs in a wind-up context would treat deposits in accordance with the wind-up provisions of the CUCPA, 2020. Any deposits that become unclaimed deposits would need to be transferred to FSRA.

CCUA

KCCU

LCU

• CCUA suggests a tiered approach to required information to relieve the administrative burden on CUs.
• CUAA suggests the removal of the following from Appendix A:
  • Next of kin information
  • Emergency contact information
  • Personal contact information relating to any principal holders of the business.
  • Trust account related items

• The following information is critical for identification and readily available across systems:
  • Legal and given names
  • Last known address
  • Date of Birth
  • Social Insurance Number
  • Account number/Portfolio number, account type, remaining balance, and signature or membership agreement.

• The following information is not readily available and should be considered for removal:
  • Recent credit report (inconsistency in approach around soft bureau pulls and the timing of these should be expected)
  • Signature cards and membership agreements (likely not in electronic form; will be physical paper in most cases)
  • Business information may be limited or inconsistent depending upon systems (no standard approach)
  • Estate and Trust information may be limited or inconsistent depending on systems (no standard approach)

• Stakeholders suggested that the Guidance should clarify that the ability of the CU to contact emergency contacts or next of kin is limited to express consent of the account holder(s) to share their financial information.
• CUs are concerned about increased risk of family fraud in the proposed alternative contact methods in the Guidance, especially if a CU member lacks the capacity to act or has passed away. This could create opportunities for family fraud by inappropriately raising awareness of the existence of accounts that could be compromised/manipulated.
• An additional concern raised by CUs is that a next of kin or emergency contact may have detailed information about a member and could bypass the security measures of a CU. Alternative contact methods are not reasonable efforts for notification, compromise a CU’s adherence to privacy regulations, and introduce heightened fraud risk on inactive accounts.
• A CU noted that FSRA should update the documentation requirement to include two more documents such as a copy of a government issued ID and a recent credit report, as available.
• A CU noted that FSRA should align with the Bank of Canada Unclaimed Properties Office reporting guide, where a xml format record of all pertinent data points is accompanied by a single original document with evidence of depositor signature.

FSRA is proposing to reduce the data required and shift the details from Appendix A of the Guidance to the Rule itself. FSRA will omit the following information fields from those listed under the proposed Rule:

• Next of kin information
• Emergency contact information
• Copies of official government ID
• Recent credit report
• Date account was opened
• Any other names the company may be carrying business under
• All names the company is carrying business under if a numbered account
• Business account agreement
• Name of trustee

The Guidance has been updated to include details clarifying the purpose of the data points listed in Appendix A of the Rule.

• CUs are able to determine “reasonable efforts” when attempting to locate and notify members and can do so in accordance with their policies with respect to member preferences for contacting next of kin or emergency contacts.
• With respect to transferred unclaimed amounts, FSRA will determine whether a person claiming entitlement to a transferred unclaimed amount has provided sufficient satisfactory evidence to demonstrate entitlement to the transferred unclaimed amount.

• Proposed revisions to the information CUs will be required to provide will remove the need for copies of documents to be provided to FSRA. Only data fields are proposed.

CCUA

KCCU

• CCUA suggested that a principles-based approach to the data required and attestation is needed. Language should consider “best efforts” by an officer of the CU to attest to the accuracy and completeness of data submitted.
• CUs noted that there may be some legacy deposits from prior banking systems and paper-based systems that make it difficult to do a full attestation of accuracy.

• Changes are proposed to Section 3(3) of the Rule to note that material information that is provided “shall be attested by an officer of the CU to be accurate, complete, and up to date, in so far as it is known to the credit union.”

CCUA

• CCUA expects that FSRA will use current systems and portals already established to ensure cost containment of the unclaimed deposits registry within the remittance process.

• FSRA will provide further information on the development of the unclaimed deposit portal in the coming year when the final design is determined.

CCUA

• CCUA expects that FSRA will report the costs of the unclaimed deposits regime, and investment gains from the pooled amounts of unclaimed deposits annually.

• FSRA reports annually to the sector through its CU Stakeholder Advisory Committee.

CCUA

• CCUA believes that digital login and transactions of any kind should count as “activity” in the same way as a physical action or acknowledgement. Further clarity is needed in Guidance or Rule in defining acknowledgement and activity on a member’s account to ensure consistency across the sector.

• The Guidance has been revised to clarify that FSRA does not consider a depositor’s account to be inactive if the depositor accesses a statement of their account through the CU’s online services.

CCUA

• CCUA is seeking further clarity around treatment of trust accounts and whether they are considered an unclaimed deposit. These accounts can be complex and often have legal requirements that create various conditions and restrictions on the funds.

• The Guidance has been revised to clarify that, if an account is a trust account, then determination of inactivity is based on the depositor that holds the account.

CCUA

• Stakeholder recommended that community accounts be carved out from the unclaimed deposits regime, as finding the holders of these community accounts can be challenging.

• No changes are proposed. The principle of protecting deposits applies to community accounts as well as to individual member accounts.

CCUA

• For non-negotiable instruments listed in the Guidance (official cheques/drafts, non-negotiated certified cheques, and non-negotiated money orders), CUs seek FSRA’s guidance on who is the owner of the funds and treatment of those funds for purposes of determining unclaimed deposits

• The Guidance has been revised to clarify that for non-negotiated instruments (including certified cheques, money orders, official cheques and drafts), the owner of the account that issued the instrument remains the owner of the funds until the instruments are settled, and it is this individual that is entitled to the funds once the unclaimed deposit has been transferred to FSRA.

CCUA

KCCU

DOCU

• CUs suggest that there’s a diminishing return on “escalated” efforts to locate the member at 5 and 9 years. It is more reasonable to put more efforts in the first two years to locate the member, and if contact is not established at 2-years the likelihood of success declines greatly.
• CCUA also suggests the removal of 5-year and 9-year contact requirements as this is likely to have limited success based on member feedback.

• The Guidance has been revised to remove text that speaks to escalating efforts to provide CUs flexibility as to when the greatest efforts are made to locate and notify members about their inactive accounts.

CCUA

• A Stakeholder suggested that FSRA should promote this new Rule to depositors, ensuring they understand the process and the effective dates will be available for searching via FSRA website.

• An education program is planned to coincide with the implementation of the unclaimed deposits regime to provide the public with an understanding of how the new system will function.

KCCU

• A stakeholder recommended that FSRA align with the Bank of Canada and collect information on only the consolidated total of the member’s unclaimed deposits, rather than individual accounts. For US funds, CUs will have used the posted conversion rate at the time of conversion, rather than the rate specified in the Rule.

• FSRA has revised Section 2(7) of the Rule to propose that:

  Immediately prior to making a payment to Authority, a CU shall:

  • convert the value of the deposit to a cash amount equal to the principal amount of the unclaimed deposit, plus interest, if any, calculated in accordance with the terms of the unclaimed deposit; and
  • convert any foreign currency amounts, if any, to Canadian currency (CAD).
• The proposed Rule also specifies in Section 2(8) that foreign currency amounts shall be based on a CU’s exchange rate as of June 30th of the year the payment under subsection 147(2) of the Act is to be made, as used by the CU for their regulatory reporting pursuant to section 199 of the Act.

SCUL

DOCU

• Stakeholders encouraged FSRA to simplify the deposit remittance schedule by establishing a single remittance period for all deposits that have become unclaimed in the same year. For example, this period could be set to the first quarter following the end of the year in which the deposit became unclaimed.

• Only one reporting period is proposed in the Rule for ease of administration and consistency.
• Section 2(5) of the Rule proposes that the cut-off for any deposits being transferred to FSRA in a given year will be June 30th. Deposits that become unclaimed as of July 1st or later will need to be submitted the following year.
• The proposed submission window is October 15th to December 15th of each year.

PEL

• A stakeholder recommended that FSRA maintain a searchable public data base, similar to the Bank of Canada’s, in which depositors can find notice of their transferred unclaimed deposits.

• Subsection 147(10) of the CUCPA, 2020, requires that FSRA maintain a searchable database of transferred unclaimed amounts.
• A searchable public database will be available once the unclaimed deposit regime is fully implemented.