Decision #82454-73Q103

File: 82454-73Q103

Compliance issue

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

A bank posted advertisements outside of the branch for mortgage interest rates and did not include the annual percentage rate (APR), or term of the loan.

Section 453 of the Bank Act and 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 annual percentage rate (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. Paragraph 19(2) of the Regulations stipulate 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 is identified as a representative example of them.

Compliance measure(s) taken

A Letter of Reprimand^{Footnote 1}  noting one violation against the bank.

Compliance considerations

The violation was contained to one branch and as such, was determined not to be systemic. The bank corrected the situation immediately.

Corrective measures taken by financial institution

• Issued a memo to all branch personnel informing them of the problem and requesting the removal of non-compliant signs.
• Assured FCAC that future marketing campaigns will comply with legislation.
• Provided training sessions to their employees across Canada regarding the process for the approval of advertising materials.
• Organized training sessions on the Cost of Borrowing (Banks) Regulations for the internal units involved.

Outcomes

It is important that consumers receive all necessary information before making the decision to purchase a financial product. 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.