Decision #54988-577Q306

File: 54988-577Q306

Compliance issue

Disclosure of charges — Failure to disclose to customers and the public, by a written statement, all of the charges that apply to personal deposit accounts, copies of which should be displayed and made available to customers and the public at all branches of the bank
Bank Act, section 446
Disclosure of Charges (Banks) Regulations, section 3

A consumer made a complaint to his bank in January 2003. The complaint was about an overdraft charge of $5 per item (totalling $40, for eight items) that the bank had applied to the customer’s account. The customer claimed that the manner in which he was charged was not consistent with how the bank had indicated it would charge him for any overdraft items in the document he received for the account. The overdraft fees for seven of the eight transactions were properly charged. An overdraft charge, in one instance, was charged on a transaction that did not create an overdraft.

In this particular case, a computer system error had caused the overdraft charges to be applied in a manner that was different from the way the bank indicated that charges would be applied.

Section 3 of the Disclosure of Charges (Banks) Regulations states that a bank shall disclose all of the charges that apply to personal deposit accounts through a written statement, copies of which are to be displayed and made available to bank customers and the public at all bank branches.

Decision taken

The Commissioner found that a violation of the Disclosure of Charges (Banks) Regulations had occurred, and imposed an Administrative Monetary Penalty of $5,000.

Compliance considerations

The bank has a computer system in place, which processes charges to customers’ accounts. It also has a system to test system procedures and detect errors when systems are updated. The system error was not detected by the bank upon its initial review of the complaint in 2003 and, despite the fact that it had been alerted to the problem in 2003, the bank did not satisfactorily demonstrate why the problem was not addressed earlier.

In this particular situation, there was also a potential for other consumers to incur financial losses due to the systems error.

Measures taken by financial institution

As a result of FCACs inquiry in March 2006, the bank became aware that a systems error had resulted in overdraft charges being applied incorrectly, in some circumstances. The bank corrected the systems error in May 2006.

The bank also indicated that it is committed to implement a recovery program to rectify any negative impact on consumers affected by the error. The bank plans to put the recovery program into effect during its current fiscal year (between November 1, 2006 and October 31, 2007).


It is important for consumers to receive all of the information they require regarding financial products. As demonstrated in this case, it is also important for consumers to have information about how financial institutions calculate overdraft charges on financial transactions.

Informed consumers are in a better position to choose the financial institution and financial product or service that best suits their needs. Disclosure of information facilitates comparison-shopping, which encourages healthy competition between financial institutions, and promotes growth and innovation in the marketplace.

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