Decision #101

Commissioner’s reasons for decision

(FCAC ACT, subs. 23(2))

The Bank

 

Files: XXX-XXXXX, XXX-XXXXXX, XXX-XXXXXX

 

In September 2007, the Acting Commissioner issued and caused to be served a Notice of Violation pursuant to subsection 22(2) of the Financial Consumer Agency of Canada Act (the Act). The Notice stated:

The Acting Commissioner proposed to impose a penalty of $15,000 for the violations. The Bank responded to the Notice of Violation with its representations dated October 2007, as permitted under the Act.

After studying the file, including the representations of the Bank, on a balance of probabilities I consider that the Bank has committed two violations by contravening paragraph 458(4)(a) of the Bank Act since on two separate occasions it failed to cash a federal government cheque without charge. However, I have decided not to assess a penalty.

Applicable legislation

Subsection 458(4) of the Bank Act states:

Facts

In February 2006, the Financial Consumer Agency of Canada (FCAC) received a complaint from a consumer who was not a customer of the Bank. The customer stated that a branch had charged him to cash his federal government cheque.

In March 2006, the same consumer contacted FCAC a second time with the information that he had returned to the same branch and again had been charged to cash his federal government cheque.

In January 2007, the FCAC received a complaint from another consumer who was not a customer of the Bank. The customer stated that a branch of the Bank had been charging him to cash his federal government cheques because he did not have an account with the Bank.

The Bank confirmed the incidents and noted that it had refunded the incorrectly charged fees.

Copies of several internal communications, all dealing with the cashing of federal government cheques, were filed by the Bank in support of its position.

Discussion

I have considered the information contained in the officer’s report and the Bank’s representations.

The facts surrounding the incidents are not in dispute.

In its representations, the Bank appears to be raising a defence of due diligence pursuant to subsection 28(1) of the Financial Consumer Agency of Canada Act. In addition, it argues that the complaints concern issues that have been addressed, are isolated in nature, and do not warrant the finding of a violation or the imposition of a penalty.

To successfully invoke a due diligence defence in relation to a violation, I would expect the Bank to demonstrate that it:

• has policies and procedures that correctly reflect compliance requirements and are readily available to employees;
• provides adequate training to employees;
• provides adequate work tools/aids;
• performs adequate monitoring of compliance;
• carries out adequate follow-up

In the cases at hand, the Bank has maintained that it had adequate policies and procedures in place. It has stated:

In support of its position, the Bank has provided copies of certain communications and work tools, rather than the policies and procedures themselves. For the purposes of this decision, I assume that the communications and work tools reflect the content of the Bank’s policies and procedures as they existed at the relevant times.

At the time of the first incidents, the only indication of the Bank’s policies on cashing of federal government cheques was an internal reference tool sent to all branches in 2005. The reference tool required Bank employees to cash government cheques but did not specify that there should be no fee for the service.

The evidence provided indicates that the Bank’s policies and procedures did not correctly reflect the compliance requirements at that time. If the policies and procedures themselves were incorrect, the Bank cannot claim to have exercised due diligence in trying to avoid contraventions of the legislation. Furthermore, it cannot be concluded that a contravention was an isolated incident or the result of employee error if the policies and procedures were incorrect or incomplete. On a balance of probabilities, I therefore conclude that two violations occurred in the same branch.

In 2006, the Bank sent a communication to all branches, followed by a revision to the internal reference tool later in 2006, which clarified that no fee should be charged for cashing a government cheque. Thus, at the time of the next case, the Bank had ensured that its policies and procedures correctly reflected compliance requirements.

The Bank has not provided any evidence about its employee training practices before the second branch incident. For the purposes of deciding the case, I have considered the information provided by the Bank regarding its actions in following up on the incidents in both branches. I have concluded that the lack of evidence of its training practices is not determinative of the outcome.

The Bank has provided copies of its internal reference tools and other communications as evidence of the work tools it prepares for its employees to promote compliance.

The Bank has not provided evidence of its monitoring practices, although it refers to the FCAC “mystery shopping” exercise. I note that the Bank agreed to an action plan for implementing additional monitoring procedures regarding cashing of government cheques.

With regard to the incident at the second branch, I accept the correspondence between the Bank and the FCAC, dated August 2007, as evidence of the Bank’s monitoring practices.

Finally, the Bank has provided evidence of its follow-up practices. There were several revisions to the relevant reference tool, additional communications and coaching of employees in both of the branches concerned.

Based on the available evidence, on a balance of probabilities I find that the Bank has exercised due diligence in the second branch incident. I therefore conclude that there was no violation in that case.

The Bank has dealt with the incidents through its follow-up practices; it did not refuse to cash a cheque in any of the incidents; and it reimbursed all incorrectly charged fees. For these reasons, I do not propose to assess a penalty for the violations in the first cases.

It is not my intention to publicize these cases pursuant to section 31 of the Act.

 

Ottawa, January, 2008

 

Ursula Menke

Commissioner

Financial Consumer Agency of Canada