Decision #61410-119Q403

File: 61410-119Q403

Commissioner’s Decision 

Compliance issue

Cost of Borrowing, credit cards — Failure to provide a monthly statement that discloses when payments were credited to the account
Bank Act, s. 570(2)
Cost of Borrowing (Authorized Foreign Banks) Regulations s. 12(5)(a)

A customer was charged interest on her credit card account even though the credit card issuer acknowledged that the customer had remitted the payment before the due date.

In an effort to avoid interest charges, the customer paid the amount owing in person at another financial institution before the payment was due. However, the credit card issuer did not post the payment to the credit card account until after the due date. As a result, the customer’s monthly statement did not reflect that a payment had been made on time, and the customer was charged interest. On the following month’s statement, the credit card issuer disclosed the amount credited and the date the payment was made, but did not disclose the date the payment was credited to the customer’s account. The credit card issuer refused to refund the interest to the customer.

Section 12(5)(a) of the Cost of Borrowing (Authorized Foreign Banks) Regulations stipulates that an authorized foreign bank that issues credit cards must provide borrowers with supplementary disclosure statements on a regular basis – at least once a month – that contain an itemized account statement that describes each transaction and discloses each amount credited or charged, including interest, and the dates when those amounts were posted to the account. 

Compliance measure(s) taken

A Letter of Reprimand^{Footnote 1}  noting one violation against the bank. The bank also entered into a Compliance Agreement^{Footnote 2}  with FCAC. 

Compliance considerations

Generally, if a consumer remits his or her payment at another financial institution on or before the due date, the credit card issuer – in this case the bank – will honour that payment as having been made on time, even if the bank has not yet received the payment. If a bank only credits an account when it receives a payment, disclosing the posting date becomes essential for helping consumers understand the reasons they have been charged for a late payment when they have remitted their payment on time. The posting date represents the date that the bank receives the payment. The disclosure of that date is a regulatory requirement. The bank did not disclose the posting date as required. 

Corrective measures taken by financial institution

The bank entered into a Compliance Agreement with FCAC and agreed to:

• identify all affected customers who were mistakenly charged interest or fees, and to rebate their fees or finance charges;
• send an explanation letter to all affected customers; and
• implement system changes to ensure that customer payments are applied correctly in the future. 

Outcomes

In this case, the compliance agreement reached between FCAC and the bank will help to ensure that this type of error does not occur in the future and that consumers’ payments will be disclosed correctly, in accordance with the Regulations. Ensuring that consumers’ rights are protected increases consumer confidence in their financial institution and the marketplace.