Decision #56170-248Q206

File: 56170-248Q206

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 - 4)

Between February 2002 and February 2006, a bank mailed out application forms inviting consumers to apply for a credit card with a possible interest rate “as low as” a certain percentage. 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 was also not disclosed in the application forms made available to consumers in the bank’s branches or on its Web site. The consumer would only receive disclosure of this information upon receipt of the credit card and credit agreement. It was noted that the bank granted a lower rate to a majority of applicants.

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 FCAC’s 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 five violations of the Cost of Borrowing (Banks) Regulations had occurred and imposed a penalty of $30,000, 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 ceased direct mail distribution, and corrected the problem for existing borrowing customers.


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.

Page details

Date modified: