Decision #42873-939Q307

File: 42873-939Q307

Compliance issue

Cost of borrowing — Failure by a bank to issue a written statement setting out the changes it had made to a credit card agreement, at least 30 days before the changes came into effect
Bank Act, paragraph 452(1)(c)
Cost of Borrowing (Banks) Regulations, subsection 12(3)

The Financial Consumer Agency of Canada (FCAC) received a complaint from a consumer regarding a change that her bank had made to the interest rate for cash advances on her credit card.

The consumer first filled out an application for a credit card at the bank branch. At that time, a branch employee verbally offered her a promotional rate for cash advances for the first three months after the credit card was issued. At the same time, the employee gave the consumer a brochure that spelled out the interest rate, as well as the terms and conditions of the promotion. However, the brochure stated that the promotional rate would be in effect for six months after the card was issued, but did not specify the dates when the offer would come into effect or terminate.

The consumer received her new credit card, and a credit agreement that contained the reduced rate the employee had given her verbally at the time she applied for the card at the branch. However, the written agreement did not specify that the interest rate was a promotional rate, nor whether it would be in effect for three months or for six months, nor what rate would eventually replace the promotional rate. However, the agreement did indicate that the rate might be changed from time to time, and that the cardholder would be informed of any changes.

Three months after the card was issued, the bank changed the reduced rate back to the higher, regular rate, without informing the consumer in writing, at least 30 days before the change came into effect. When it investigated the situation, FCAC found that this was the bank’s established practice, which applied to all consumers in the same situation.

Under subsection 12(3) of the Cost of Borrowing (Banks) Regulations, if a credit agreement for a credit card is amended, the bank must inform the borrower in writing, 30 days or more before the amendment takes effect.

Decision taken

The Acting Commissioner ruled that the bank had violated subsection 12(3) of the Cost of Borrowing (Banks) Regulations, and imposed a penalty of $25,000. The bank paid the penalty, and FCAC closed the file.

Compliance considerations

The violation was due to the bank’s established practice of not informing consumers in writing when a promotional rate increases before the promotional period expires. The bank’s position was that, by giving consumers — at the time they applied for a credit card in a branch — a brochure setting out the terms of the promotion, the institution was meeting the requirements of the Regulations, even though the brochure in question did not specify when the regular rate would come into effect. Furthermore, the terms of the promotion that were spelled out in the brochure were not included in the credit agreement, when the credit card was issued.

Under the Cost of Borrowing (Banks) Regulations, if a bank makes changes to a credit card agreement, it must inform the borrower in writing, 30 days or more before the amendment takes effect. By not fulfilling this requirement, the bank denied borrowers the opportunity to consider the other options available to them.

Measures taken by financial institution

The bank made a commitment to change its credit agreement and include information about both its regular and its promotional interest rates, as well as the dates on which these rates would take effect.


The purpose of the Cost of Borrowing Regulations is to ensure that credit card holders receive accurate and complete written information when they sign a credit contract.

The Regulations are also intended to ensure that cardholders are informed of any changes to their credit card agreement before the changes take effect, so they can act accordingly. In the present case, FCAC ensured that, when credit card holders sign a credit agreement, they are informed of any possible variations in the interest rate.

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