Decision — File #25217-263Q205

Compliance issue

Cost of borrowing — Failure to disclose accurate information about an optional service related to a credit agreement for a credit card

Bank Act, paragraph 452(2)(e)

Cost of Borrowing (Banks) Regulations, subsections 12(1) and 12(4)

A bank offered a new optional service for one of its credit cards. A consumer who was a holder of the credit card in question and who was over the age of 65 opted for the service being offered, including an insurance benefit, and paid for it. At the time the service was launched, however, the benefit was restricted to those under the age of 65. As a result, the consumer had to go to another provider and incur an additional cost to obtain the desired service.

Meanwhile, in response to numerous consumer complaints about the age restriction, the bank removed the restriction shortly after the optional services was first offered, and made this change retroactive to the date the service was launched. However, the bank failed to advise some cardholders, including the above-mentioned customer, that the age restriction had been lifted. In fact, many cardholders were not informed until several months later. In addition, the information sent to some cardholders indicated that the change was an upgrade to the product that would take effect from then on, rather than a change that was being applied retroactively.

Under subsection 12(1) of the Regulations, banks are required to provide to cardholders an initial disclosure statement containing information about an optional service. In addition, under subsection 12(4) of the Regulations, banks are required to disclose to cardholders any amendment to a credit agreement, in the first disclosure statement provided to cardholders after the amendment is made.

Decision taken

The Commissioner issued a Notice of Violation, noting two violations against the bank.

Compliance considerations

New consumers were not provided with proper initial disclosure about an optional service, which affected their ability to make informed decisions about a financial product. Existing consumers aged 65 years and over were not informed of the change to the service until several months after the modification was made. In addition, the wording of the notice sent to customers was misleading with regard to the timing of the change, as it did not mention any potential retroactive effect that might apply in their situation.

No previous violations of this nature have been noted against the bank.

Measures taken by financial institution

The bank informed customers of the changes to the cardholder agreement by means of a mailing insert that outlined the changes. The bank has undertaken to reprint its insurance certificates to ensure the information is accurate.​