Decision #41641-375Q107

File: 41641-375Q107

Commissioner’s Decision

Compliance issue

Cost of Borrowing — Failure to disclose, in its mail and telephone solicitations for credit cards, the date on which non-interest charges take effect
Bank Act, subsection 570(1.1)
Cost of Borrowing (Authorized Foreign Banks) Regulations, subsection 11(4)

A consumer complained to his authorized foreign bank about being billed for an annual fee on a credit card even though the account had never been used and the credit card had never been activated. The bank solicited the consumer by telephone and told him about the annual fee, but did not tell him the date on which the annual fee would take effect. The bank only disclosed this information to the consumer in a letter it sent, acknowledging its receipt of the credit card application, after the consumer had applied for the card.

Section 570 of the Bank Act states that an authorized foreign bank must act in accordance with the Regulations and disclose the prescribed information to the consumer as indicated in the Regulations.

Section 11 of the Cost of Borrowing (Authorized Foreign Banks) Regulations outlines the disclosure requirements for credit card applications and solicitations. Subsection 11(4) states that an authorized foreign bank that issues credit cards and solicits applications for them — in person, by mail, by telephone or by any electronic means — must, at the time of solicitation, specify in the form or in a document accompanying the form, a fixed rate of interest, the annual interest rate or the variable interest rate, the amount of any non-interest charges and the date on which each of the above-mentioned items takes effect.

Decision taken

The Acting Deputy Commissioner found that one violation of section 570(1.1) of the Bank Act — namely, subsection 11(4) of the Cost of Borrowing (Authorized Foreign Banks) Regulations — had occurred, and imposed a penalty of $10,000, which the financial institution paid.

Compliance considerations

The bank believed it was meeting the requirements of subsection 11(4) of the Regulations by, among other things, providing a disclosure statement with the follow-up letter it sent to the consumer, after receiving the consumer’s application for a credit card. However, the Regulations clearly state that information regarding non-interest charges and when they apply must be disclosed at the time of the solicitation.

More than 1,700 consumers paid the annual fee without ever activating the account. The bank explained that these consumers might have been prepared to keep the card in order to maintain the credit facility for future purposes.

Measures taken by financial institution

The financial institution modified the script for its telephone solicitations, and the disclosure documents accompanying its mail solicitations, to ensure that it was complying with the Bank Act and the Regulations.


The Cost of Borrowing (Authorized Foreign Banks) Regulations set out the information that credit card issuers must disclose to consumers when they solicit applications for credit cards in person, by mail, by telephone or by any electronic means. This includes specific requirements for disclosing the date at which any non-interest charges associated with the credit cards take effect.

The disclosure requirements in the Regulations were created to make it easier to compare the cost of borrowing among financial institutions and to ensure that consumers have the information they need to make sound financial decisions. People are entitled to know the costs associated with the products they apply for, and when the charges for those products take effect.

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