Decision #29470-281Q206

File: 29470-281Q206

Compliance issue 

Cost of Borrowing – Failure to disclose the interest rate and the amount of non-interest charges on a credit card application form or when soliciting credit card applications

Bank Act, subsection 452 (1.1)
Cost of Borrowing (Banks) Regulations, subsection 11(1)(a), (4) 

Between February 2002 and November 2004, a bank mailed out application forms inviting consumers to apply for a credit card that provided various rates of interest for which an applicant could qualify. However, the bank’s application form did not disclose the actual rate the consumer would receive, nor did it disclose the amount of non-interest charges that would apply to the credit card. This information also was not disclosed during telephone solicitations or on the online application forms. The applicable rate was only disclosed to new customers once the application process was completed and the customer had committed to receiving a credit card and the credit agreement was in place. However, the bank did appropriately disclose the specific interest rate that would apply to existing credit card customers. 

Section 11 of the Cost of Borrowing (Banks) Regulations specifies disclosure requirements for credit card applications and solicitation. A bank that issues credit cards, and distributes an application form for credit cards, must specify the annual interest rate and the amount of non-interest charges on the credit card application at the time of application. When soliciting credit card applications by telephone or by electronic means, the annual interest rate and the amount of non-interest charges must be specified at the time of solicitation. 

The Agency’s compliance concern about the proper disclosure of interest rates on credit card application forms was raised in December 2003 by way of the Financial Consumer Agency of Canada (FCAC) industry newsletter. This newsletter addressed the practice of some credit card issuers not disclosing the interest rate on their cards but rather offering the possibility of qualifying for one of a number of rates. It was the Agency’s view that this did not comply with the law.  

Decision taken 

The Commissioner found that four (4) violations of the Cost of Borrowing (Banks) Regulations had occurred and imposed a penalty of $20,000, which was paid by the financial institution.  

Compliance considerations 

When the Commissioner determines that a violation has occurred, the Commissioner has the authority to impose a penalty of up to $50,000 for an individual, or $100,000 for a financial institution. When assessing the amount of a penalty, the Commissioner is required to take into consideration the following three factors, as set out in the law: 

  1. the degree of intention or negligence on the part of the person who committed the violation;
  2. the harm done by the violation;
  3. the financial institution's compliance history within the five year period immediately before the violation. 

With respect to the factor of harm done, the Commissioner has a broad perspective. If an institution fails to disclose the information required by law, the institution gives itself an unfair advantage in the marketplace. This is against the principle of maintaining a level playing field for all financial institutions. 

In the present case, all the facts and circumstances of the case were taken into account when applying the above-mentioned factors for the purpose of determining the amount of the penalty.  

Measures taken by financial institution

The bank acted to correct the problem by fall 2004. 


The Cost of Borrowing Regulations set out the information that lenders must disclose to consumers before and after entering into a credit agreement. This includes specific requirements to disclose interest rates and non-interest costs associated with a credit card. 

The disclosure requirements in the Regulations were created to make it easier for consumers to compare the cost of borrowing between different financial institutions and to ensure that they have the information they need to assist them in making more sound financial decisions. 

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