Decision #66228-073Q204

File: 66228-073Q204

Compliance issue

Branch closure — Failure to notify Commissioner of closure within required time; failure to include certain prescribed information in notice; failure to give notice to customers and public within required time
Bank Act, s. 459.2
Notice of Branch Closure (Banks) Regulations, ss. 4(1), 4(2)(c) and (d), 5(2),
5(4)(f) and (g)

A federally regulated bank offered its services through the branch network of a non-federally regulated financial institution. The non-federally regulated financial institution acted as an agent for the bank, offering the bank’s products and services including opening accounts, cashing cheques and issuing loans.

When the non-federally regulated financial institution decided to close three of its branches, consequently terminating the services offered to the customers of the federally regulated bank, the bank did not provide advance notice to its customers or the Commissioner, as required by the Notice of Branch Closure (Banks) Regulations.

Subsection 4(1) of the Regulations requires that a bank in an urban area, or in a rural area where there is another retail-deposit taking branch within 10 km, provide a notice to the Commissioner at least four months prior to the closing of the affected branch.

Paragraphs 4(2)(c) and (d) of the Regulations state that the notice must include a list of alternative locations where customers of the closing branch can go to obtain similar financial services, or a phone number that customers can call to obtain a list of these locations. The notice must also include the measures, if any, that the bank is taking to maintain any financial services in the area that is served by the branch.

Subsection 5(2) requires that notices be provided to customers of the branch and the public at least four months prior to the closure date.

The notice must also contain information about how to contact the Commissioner and the conditions under which the Commissioner may require a meeting between the bank, interested parties and FCAC to discuss the closure in further detail as required by paragraphs 5(4)(f) and (g) of the Regulations. 

Compliance measure(s) taken

Letter of Reprimand^{Footnote 1}  was issued, noting one violation against the bank.

Compliance considerations

Considering the new and innovative business models currently being used by banks for service delivery, it is important to consider the legislation. The Regulations are meant to ensure that customers of the bank and members of the public have an opportunity to arrange their financial affairs prior to a branch closure, and that they are able to exchange views with their bank concerning the closure. In this instance, consumers may not have had enough time to organize, negotiate and implement arrangements with new financial service providers, who may have offered products that better suited their needs.

The notices given to the customers, the public and the Commissioner were not provided in the prescribed timeframe and did not include information about how to contact the Commissioner. They also failed to include a statement that the Commissioner may require the bank to convene and hold a meeting between the bank, FCAC and interested parties if he felt that there had not been sufficient consultation with the community. This would have been particularly important for the customers of one of the branches where the receiving branch was 100 km from the closing branch, and the next closest financial institution was located 9.4 km away.

Measures taken by financial institution

• Changed its branch closure policies to comply with the Regulations.

Outcomes

It is important that banks that enter into any outsourcing or similar agreements ensure that the appropriate provisions are incorporated so that the bank is fully capable of complying with the Regulations and so that consumers’ rights are protected.

It is also essential that customers, the public and the Commissioner are made aware of branch closures in a timely fashion. When the Commissioner is made aware of branch closures, FCAC is able to monitor the situation proactively to make certain that consumers have received adequate notice of the branch closure, and all of the information required. For consumers, having sufficient notice of a branch closure puts them in a better position to make informed choices and find alternatives to their current banking services. By also ensuring that consumers are aware of the conditions under which the Commissioner can call a public meeting, FCAC and the bank ensure that consumers have the opportunity to communicate openly with their bank to explore ways of easing any negative impact the closure may have on them or on the community as a whole.