Decision #36262-509Q107

From: Financial Consumer Agency of Canada

File: 36262-509107

Compliance issue

Accounts — Refusal to open a retail deposit account and failure to provide a written Notice of Refusal to open a deposit account
Bank Act, subsection 448.1(1)
Access to Basic Banking Services Regulations, section 5

In three separate instances, a bank refused to open a retail deposit account for a consumer.

In the first case, the refusal was due to information contained in the consumer’s credit file. In the second case, even though the consumer presented two valid pieces of identification to the bank, he did not provide his social insurance number when requested to do so. In the third case, the consumer presented two valid pieces of identification but did not provide proof of address, which the bank required.

None of the above reasons for refusal are acceptable under the Access to Basic Banking Services Regulations. Moreover, the bank did not give any of these consumers a written Notice of Refusal, as required by the Regulations.

Subsection 448.1(1) of the Bank Act requires banks that are members of the Canada Deposit Insurance Corporation and that open retail deposit accounts through a natural person to open an account for consumers who meet the requirements set out in section 4 of the Regulations.

Section 4 states that consumers can open a retail deposit account if they go to the bank in person and present acceptable identification. Section 5 of the Regulations stipulates that when a bank refuses to open a retail deposit account, it must provide consumers, in writing, with a Notice of Refusal stating its refusal to open the account, as well as a statement indicating that consumers can contact the Financial Consumer Agency of Canada (FCAC) if they have a complaint, which includes information on how to contact the Agency.

Dec​ision taken

The Acting Commissioner found that three violations of subsection 448.1(1) of the Bank Act and three violations of section 5 of the Access to Basic Banking Services Regulations had occurred, and imposed a penalty of $6,000, which the financial institution paid.

Com​pliance considerations

While the cases stemmed from individual incidents, the compliance issues found were systemic in nature. The bank stated that in the first two instances the refusal was because of an employee error. However, at the time of the first incident, the bank’s account-opening procedures instructed employees to follow due diligence and verify the consumer’s credit bureau file. These instructions may have led employees to believe that if a consumer had a poor credit history, this would constitute grounds for refusing to open an account. In the second case, the bank’s account-opening procedures at the time noted that a social insurance number was required to open an account. In the third case, the bank’s application form for a deposit account showed that proof of address, such as a utility bill, was required for a consumer to open a deposit account.

In all three cases, none of the reasons for refusal were acceptable reasons under the Access to Basic Banking Services Regulations. In all three cases, the individuals involved were denied access to an account and, moreover, were not provided with the benefit of receiving a Notice of Refusal as required under the Regulations.

Meas​ures taken by financial institution

The bank subsequently revised its account-opening procedures, to clarify that neither a credit bureau check nor a social insurance number is required to open an account. The bank also removed the proof of address requirement from its application form for a deposit account. The bank likewise reviewed and reconfigured its account-opening procedures to ensure that they complied with the Regulations. As well, the bank retrained all of the employees who are responsible for opening deposit accounts to ensure they understand the requirements for opening this type of account, and that they know when they have to provide a written Notice of Refusal.

The bank also revised its Notice of Refusal to make customers aware of FCAC and provide them with information on how to contact the Agency, so that they can bring potential compliance issues to FCAC’s attention.

Outco​mes

The Government of Canada established the Access to Basic Banking Services Regulations because having a bank account is essential for managing ones personal finances. Consumers who have access to a bank account are able to participate more effectively in the financial marketplace. As a result of the Regulations being in force, the bank has implemented new procedures for opening accounts and has taken steps to prevent any future violation of the Regulations.

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