Decision #23826-293Q204

File: 23826-293Q204

Compliance issue

Cost of Borrowing — Failure to disclose required information in a credit card agreement
Bank Act
Cost of Borrowing (Banks) Regulations

In some of its individual credit card agreements given to customers, a bank failed to disclose the time from which interest accrues, the grace period and the manner in which the daily interest was calculated.

Section 10(1)(f) of the Cost of Borrowing (Banks) Regulations stipulates that a bank that enters into a credit agreement must provide the borrower with an initial disclosure statement that includes the date on and after which interest accrues and information concerning any grace period that applies.

Section 12(1)(a) states that a bank that enters into a credit agreement for a credit card must provide the borrower with an initial disclosure statement that includes the manner in which interest is calculated.

Decision taken

A Letter of Reprimand^{Footnote 1}  noting two violations against the bank.

Compliance considerations

The incomplete credit card agreements were distributed to approximately 271,000 individuals and the problem continued for five months before the bank noticed the omission. This indicated to FCAC that there was a significant problem with the bank’s quality control and systems implementation procedures. However, since the time from which interest accrues and the grace period were disclosed when consumers applied for a credit card, and their monthly statement would have disclosed both the grace period and the method of calculating interest, the consumer would have had this information when they applied for the credit card and when they received their first monthly statement. Because of these considerations, the actual impact on consumers was lessened.

Corrective measures taken by financial institution

• Self-reported the error to FCAC.
• Sent a letter to customers affected, apologizing for any inconvenience and including the missing information required. This was done approximately five months after the incomplete agreements were generated and distributed.
• Added a note to the electronic profile for each customer affected, and authorized customer service representatives to refund these customers.

Outcomes

It is important for consumers to have all the necessary information about a financial product. In this case, consumers were entitled to receive key information pertaining to the cost of their credit card before accepting or using the card. This information helps consumers choose the card they want, and helps them to avoid paying interest by informing them how long they have before items purchased with their credit card accrue interest. Ensuring consumers are informed encourages healthy competition between financial institutions and promotes growth and innovation in the marketplace.