The Financial Consumer Agency of Canada fined a bank $50,000 for failing to tell a borrower about changes to their mortgage payments.
The Deputy Commissioner of the FCAC issued a Notice of Violation against the unnamed bank stating “reasonable grounds to believe that it had committed one violation by contravening subsections 13(1) and 13(2) of the Cost of Borrowing (Bank) Regulations.”
The case began on August 2010, when the consumer contacted the bank requesting a change to his mortgage loan. Specifically, the consumer “requested that the mortgage payment frequency be modified from bi-monthly to a bi-weekly schedule,” according to the FCAC report.
When asked by MortgageBrokerNews to identify the bank, Julie Hauser, the media relations officer with FCAC, replied via email that "Subject to Section 31 of the FCAC Act, the Commissioner may make public the nature of a violation, who committed it and the amount of any applicable administrative monetary penalty. She has chosen to not exercise that right in this Notice of Decision."
In September 2011, the consumer complained to FCAC, following the payment frequency change, when his mortgage fell into arrears due to a bank error.
Although the consumer's issue had been addressed and corrected by the bank, the resulting investigation by the Compliance and Enforcement Branch (CEB) revealed a broader compliance issue.
The CEB's investigation revealed that the bank “did not provide any type of amended disclosure documents to borrowers when consumers requested changes to the frequency of their mortgage payments that resulted in reductions in the cost of borrowing.”
According to the commissioner’s decision, the bank failed to disclose in writing to the borrower “any resulting changes to the initial disclosure statement 30 days after the day on which an amendment to a credit agreement for a residential mortgage is made;“ and “an amended payment schedule for fixed amount residential mortgages not later than 30 days after the day on which the amendment is made.”
The bank argued that it “did not intend to file written representations; therefore, it was deemed to have committed the violation.”