Appearance before the Standing Committee on Finance (July 7, 2020): Disclosure statements for financial products

Issue

During the pandemic, many consumers have taken advantage of financial relief measures to defer credit payments that have been offered to them from their financial institutions. There is a general concern about the disclosure information that has been provided to consumers, specifically whether consumers fully understand the implications of deferred payments.

Background

FCAC monitors the adherence of federally regulated financial institutions with the relevant disclosure requirements that exist for credit products (predominantly through the Cost of Borrowing Regulations). Any disclosure required to be provided to a consumer under these regulations must be presented in a manner that is clear, simple and not misleading. As the banks set up their deferral programs very quickly, there is concern about what has been communicated to consumers on the impacts of their deferral request.   

Data/Quick facts

• FCAC has requested and reviewed training material used for the large banks and is satisfied that, on the whole, scripts have been provided to staff to adequately inform them of how to explain the deferrals to consumers. 
• Most banks have added an FAQ section to their website where consumers can go for relevant information.
• FCAC has requested copies of the new disclosure information from banks in order to review it. Note that the information is not required to be disclosed to consumers until after the deferrals have expired. New cost-of-borrowing disclosure information is expected to be sent to all borrowers at that point. 

Key messages

• Consumers do not always read or fully understand disclosure statements for financial products, which can include complex language. As a result, such consumers may make financial decisions that are not in their best financial interests.
• During times of financial stress, consumers may rely more heavily on the information that banks provide them. 
• FCAC’s role is to ensure banks meet their disclosure obligations by presenting information in a manner that is clear, simple and not misleading and by providing the borrower with a record of the changes to the credit agreement, in writing, within 30 days of the changes taking effect. 
• FCAC is working with banks to review all of the disclosure statements for financial products that they have updated during the pandemic.
• FCAC has increased the consumer education material that it makes available on its website for Canadians to assist them in managing their financial situation during this challenging time.