Decision #102

Commissioner’s reasons for decision

(FCAC ACT, subs. 23(2))


On November 19, 2007, the Acting Commissioner issued and caused to be served on the Bank a Notice of Violation pursuant to subsection 22(2) of the Financial Consumer Agency of Canada Act (the Act). The Notice stated:

I have reasonable grounds to believe that the Bank has committed one violation by contravening subsection 11(1) of the Cost of Borrowing (Banks) Regulations, SOR/2001-101 in that it failed to disclose:

  • In the application forms distributed through the mail by the Bank, when the non-interest charges (annual fee) would take effect, as per subsection 11(1) of the Cost of Borrowing (Banks) Regulations.

The Acting Commissioner proposed a penalty of $5,000 for the violation. The Bank responded to the Notice of Violation with its representations dated December 19, 2007, as permitted under the Act.

I have studied the file, including the Bank’s representations. On a balance of probabilities, I consider that the Bank has committed one violation by contravening subsection 11(1) of the Cost of Borrowing (Banks) Regulations (the Regulations). In view of the actions taken by the Bank, however, I will not impose a penalty.

Applicable regulations

The Cost of Borrowing (Banks) Regulations state:

11 (1) A bank that issues credit cards and that distributes an application form for credit cards must specify the following information in the form or in a document accompanying it, including the date on which each of the matters mentioned takes effect:

a. in the case of a credit card with a

a. fixed rate of interest, the annual interest rate, or

b. variable interest rate that is determined by adding or subtracting a fixed percentage rate of interest to or from a public index, the public index and the fixed percentage rate to be added or subtracted from it;

b. the day on and after which interest accrues and information concerning any grace period that applies; and

c. the amount of any non-interest charges.


In November  2005, a consumer contacted the Financial Consumer Agency of Canada (FCAC, or the Agency), complaining that he had been billed twice in one year for the annual $50 fee on his Bank credit card account.

According to the compliance officer’s report, the investigation confirmed that the Bank had made processing errors in connection with its promotional offer. The Bank had corrected the errors and issued reimbursements as appropriate. No further compliance action was taken on this matter.

However, during the investigation, the officer also reviewed the application form for the Bank’s promotional offer. The officer found that neither the application form nor any of the accompanying documents provided information about when the non-interest charges, and particularly the annual fee, would take effect.

Position of the Bank

After the Bank received the Notice of Violation issued in November 2007, it submitted its representations in December 2007. The representations contained the following statements:

It was evident to consumers that the disclosed annual fee would be assessed after the account was opened and annually thereafter. When the Bank learned of the FCAC interpretation of the Regulation and their concerns with the industry disclosure of annual fees the Bank proactively enhanced its disclosures to address the FCAC’s concerns. The updates to our disclosures were referenced in the Compliance Report.

We would like to highlight that we are not aware of any complaints received by the Bank regarding the date that the annual fee takes effect.


A review of the Bank’s representations shows that the Bank does not dispute the facts presented in the officer's report, nor does it furnish additional arguments to counter the officer’s analysis of the issues. FCAC’s Compliance and Enforcement Branch will initiate an industry-wide review of the matter.

The fact that a contravention may be industry-wide does not necessarily rule out action by FCAC in individual compliance cases. For example, the Agency acted on particular cases dealing with the marketing and disclosure issue of “rates as low as.” FCAC has found this approach to be more effective than proceeding solely on an industry-wide basis. Before institutions will consider taking corrective measures, often they need clear guidance from the Agency based on a specific set of facts. An actual case offers a model that they can compare with their own circumstances.


I have considered the facts in the case at hand and the representations made. On a balance of probabilities, I find that the Bank committed one violation because the application forms it distributed by mail failed to disclose when the non-interest charges (annual fee) would take effect, as required under subsection 11(1) of the Cost of Borrowing (Banks) Regulations.

I note that in another case dealing with the same compliance issue (see FCAC Web site, Commissioner’s Decisions, April 1 to June 30, 2007), an administrative monetary penalty of $10,000 was imposed on a bank found to have committed a similar violation. In the present case, the harm done is minimal, and the Bank has made the necessary changes to its forms and procedures to further limit the risk of human and systems errors. Accordingly, no penalty is assessed.

It is not my intention to publicize this case pursuant to section 31 of the Financial Consumer Agency of Canada Act.

Ottawa , February, 2008


Ursula Menke


Financial Consumer Agency of Canada

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