Banks slapped with fines over borrowing disclosure violations

The Financial Consumer Agency of Canada (FCAC) published three decisions August 20, where banks named in the decisions violated regulations requiring adequate disclosure of fees and other charges.

“All federally-regulated financial institutions are expected to review the findings of the decisions and apply them to their own practices as appropriate,” the FCAC writes in its statement about financial institutions not meeting disclosure requirements on credit products.

In the separate decisions, Canadian Imperial Bank of Commerce (CIBC), the Canadian Western Trust (CWT) Company and its parent company, Canadian Western Bank (CWB) were fined $1.225-million, $200,000 and $200,000 respectively.

In CIBC’s case, it did not disclose over limit fees or optional insurance charges. The bank also failed during the period in question, to “make the disclosure on interest charges in language, and to present it in a manner that is clear, simple and not misleading.” In addition, the bank introduced a delay of two or three days between the receipt of payments, including payment by digital transfer of funds from CIBC accounts, and the posting of those payments to the cardholders’ account. The posting delay was not disclosed to cardholders. “The result was that cardholders could be charged over-limit fees, insurance premiums and interest when, according to the disclosure they received, they had every reason to expect that their payment was made and received in time to avoid these costs.” CIBC became aware of the posting delay for over limit fees, some 13 years after it was introduced. “During the course of the investigation by FCAC staff, it was determined that the disclosure of credit insurance premiums and of interest were also at issue.”

CWT and CWB, meanwhile, were fined for failing to disclose to borrowers certain non-interest charges and fees, such as application, renewal and mortgage discharge fees, along with appraisal and legal fees. While CWT maintains that a relatively small number of customers were affected, the Commissioner’s decision related to CWT notes that the breach occurred over nine years and was continuing when the notice of violation was issued in May 2019. “The total amount of improperly disclosed fees relating to the violation may have been as high as $32.8-million, potentially affecting an estimated 15,106 customers. The Commissioner’s decision related to CWB notes that the total amount of improperly disclosed fees well exceeds $3-milllion. “These figures do not include fees or customers affected subsequent to May 2018, as the disclosure deficiencies were still outstanding as at May 16, 2019.”