Decision #32714-321Q105

File: 32714-321Q105

Compliance issue 

Cost of borrowing, Credit cards – Failure to provide a supplementary disclosure statement that discloses the amount that the borrower must pay in order to have the benefit of a grace period

Bank Act, s. 450(1)
Cost of Borrowing (Banks) Regulations, ss. 10(1)(f), 12(5)(b) 

A consumer contacted the Financial Consumer Agency of Canada (FCAC) to report that he was being charged interest in respect of purchases he had made with his credit card, even though the purchases were not yet shown on his monthly statement and, consequently, were not included in the total monthly balance shown on the statement. 

After looking into the complaint, FCAC found that the consumer had taken advantage of a promotional offer from the bank and obtained convenience cheques that offered a lower interest rate. The cheques contained a condition on the reverse side that purported to change the allocation of payments. These would now be allocated first to new transactions, whether or not these had appeared on the credit card statement. In the case in question, this resulted in a loss of the grace period offered in the cardholder agreement and interest charges to the consumer. 

The promotional cheques were used by approximately 158,000 customers, 8,200 of whom were affected in a similar way.  

Decision taken​ 

A Notice of Violation was issued, noting one violation against the bank. 

Compliance considerations 

The bank had no previous record of any violations related to the consumer provision under consideration. 

Measures taken by financial institution 

• The bank committed to issuing, and has since issued, a refund to all cardholders who had taken advantage of the offer and were adversely affected.
• The bank also reviewed its payment allocations and, as a result, changed its practice from applying payments to lower-rate, unbilled transactions to applying payments first to transactions that appear on the statements.
• The bank mailed an updated account-holder agreement to customers, which disclosed how their payments would be allocated.