Decision #99257-02Q103

From: Financial Consumer Agency of Canada

File: 99257-02Q103

Compliance issue

Cost of Borrowing — Failure to disclose the annual percentage rate (APR) and term of a mortgage in an advertisement
Bank Act, s. 453
Cost of Borrowing (Banks) Regulations, ss. 19(1) and (2)

A bank posted signs outside 13 branches advertising the interest rate for a mortgage but failed to disclose the annual percentage rate (APR) and the term of the mortgage on the advertisements.

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 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 orally or both. Subsection 19(2) requires that if the APR or the term of the loan is not the same for all loans to which the advertisement relates, the disclosure must be based on an example of a loan that fairly depicts all those loans and be identified as a representative example.

Compliance measure(s) taken

Letter of ReprimandFootnote 1  noting 13 violations against the bank.

Compliance considerations

The problem was determined not to be systemic because it resulted from the failure of two employees in one region to follow the proper bank authorization process for advertising. The time taken by the bank to comply with legislation once they had been made aware of the problem was also taken into consideration, since it took the bank almost two weeks to correct the problem. There were no previous violations noted against the bank.

Corrective measures taken by financial institution

  • Removed the signs within two weeks.
  • Implemented a new customer communications policy which was communicated to all offices and all employees. This policy was incorporated into the online branch manual and procedures, and provided explicit standards for review and approval of all marketing and communications including advertising and branch marketing and merchandizing. The following are some of the key standards developed to provide a permanent solution to the problem identified:
    • All marketing and customer communications will be developed in accordance, and comply with, the policy and legal requirements.
    • All marketing and customer communications will require legal approval.
    • Templates will be permitted for use as long as they have been approved by the marketing and legal departments.
    • Pre-approved ads will not be altered.
    • The compliance department will be informed of any communications from regulators indicating potential or actual non-compliance with regulations.
    • Notice of any regulatory contravention will be corrected immediately.
  • Developed a global policy concerning the roles and responsibilities with respect to communications to and from regulators which was communicated through an internal web site and distributed to key senior business development employees in the bank.


It is important that consumers receive all necessary information before making the decision to purchase a financial product. In this case, it was important that the consumer be provided with all the 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.

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