Decision #56611-622Q203

File: 56611-622Q203

Commissioner’s Decision 

Compliance issue

Cost of Borrowing — Failure to disclose the term of a mortgage in an advertisement
Bank Act, s. 453
Cost of Borrowing (Banks) Regulations, s. 19(1)

A bank posted an advertisement in its front window indicating the rate for a mortgage but failed to disclose the term of the loan in the advertisement.

Subsection 19(1) of the Cost of Borrowing (Banks) Regulations stipulates that a bank that advertises a loan involving a fixed amount and which mentions the interest rate, must also disclose the annual percentage rate (APR) and the term of the loan. The APR must be displayed at least as prominently as the representation and in the same manner, whether visually or aurally or both. 

Compliance measure(s) taken

A Letter of Reprimand^{Footnote 1}  noting two violations against the bank. 

Compliance Considerations

Once notified, the bank corrected the problem immediately. The advertisement was a local initiative and had not been submitted to the corporate Marketing Department for approval. As such, the problem was determined to be isolated and not systemic. 

Corrective measures taken by financial institution

• Removed the sign after being notified of the problem.
• Sent a circular to all branches reminding employees of the existing policy that all advertisements must be approved by the corporate Marketing Department.
• Assured FCAC that the problem was not a result of a lack of employee training. 

Outcomes

It is important that consumers receive all the necessary information before making a decision to purchase a financial product. In this case, it was important that consumers be provided with key information pertaining to the cost of the loan. Informed consumers are in a better position to choose the financial institution and financial product or service that best suits their needs and banking habits. Facilitating comparison-shopping encourages healthy competition between financial institutions and promotes growth and innovation in the marketplace.