CG-1 Disclosure on opening a deposit account

From: Financial Consumer Agency of Canada

Attention: CG-1 repealed on July 1, 2014

The Commissioner has repealed FCAC Guideline CG-1—Disclosure on Opening Deposit Accounts, published in 2007. This repeal is a result of amendments made to the Bank Act and the coming into force of the Registered Products Regulations on November 1, 2011.

FCAC Guideline CG-1 was seen as no longer required because the Registered Products Regulations specify the types of registered products covered, as well as the additional disclosure requirements that Federally Regulated Financial Institutions (FRFI) must meet.

Legislation

Subsection 445(1) of the Bank Act outlines a statutory obligation for banks to provide the following information, in writing, to individuals who request a deposit account to be opened: the account agreement, the applicable charges, how the customer will be notified of any increase or of any new charge, the bank’s procedures with respect to complaints about how these charges are applied and any other information that may be prescribed.

Issue

FCAC recently dealt with a case that involved disclosure requirements for deposit accounts that are opened under registered retirement savings plans. The bank’s view, on this matter, was that, since the Bank Act did not address the issue of accounts opened under registered plans, there was some ambiguity as to whether the account-related disclosure requirements of the Bank Act applied in this type of situation. The bank argued that other federal legislation dealt with issues related to registered plans.

During its investigation of this case, FCAC noted that, since the bank could not locate the customer’s file, the institution was unable to confirm whether it had disclosed to the customer any of the information that the Bank Act required to be disclosed.  

Interpretation

The Acting Commissioner was of the opinion that the requirements of the Bank Act, and related regulations, do apply to deposit accounts, even if they are held within registered retirement savings plans. As defined by the Canada Revenue Agency (CRA), a registered plan is a plan that is sponsored by a financial institution and filed with CRA for registration under, and compliance with, the Income Tax Act — which normally provides for certain tax exemptions. However, neither the Income Tax Act nor any other federal legislation that touches upon registered plans negate the obligations of financial institutions that are described under the consumer provisions of the Bank Act. Financial institutions therefore have a regulatory obligation to provide the required disclosure whenever a deposit account is opened, even if it is opened under a registered plan.

The Acting Commissioner is also of the view that, if requested to do so by a regulator, a financial institution must be able to demonstrate that it has complied with the law, by producing documentation of all agreements, disclosure notices and the like that it has provided to the consumer. Simply because a financial institution has proper policies and procedures to provide such disclosure to consumers does not mean that the institution can demonstrate satisfactorily that, on a balance of probabilities, it has complied with its legislated obligations with respect to disclosure, in a particular case.

Conclusion

Given the facts of this case, the Acting Commissioner chose not to exercise his discretion to issue a Notice of Violation. However, he did state that a financial institution has a statutory obligation, under the Bank Act, to disclose the prescribed information when a deposit account is opened — even if it is opened under a registered plan.

A financial institution must also be able to demonstrate to the regulator that it has complied with its statutory obligations, by producing copies of documents that the law requires be provided to the consumer, on request.

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