Big Six bank faces $400,000 penalty for effectively pocketing $31 million in fees from around 500,000 elderly customers
The Financial Consumer Agency of Canada (FCAC) has hit Toronto-Dominion Bank with a $400,000 fine for neglecting to properly disclose the details of a special discount program that would have benefited hundreds of thousands of its senior clients.
In her decision against the bank, FCAC Commissioner Judith Robertson said that in March 2012, the bank discontinued a free account program that it had been offering to seniors, replacing it with a new fee schedule. The schedule included a reference to a senior’s rebate, under which clients aged 60 and above would be entitled to a 25% discount on their monthly fee.
However, the FCAC said the disclosure document set out the details of the rebate in a footnote, and it didn’t show the actual charge for eligible accounts held by seniors as a dollar amount. The document also failed to provide instructions on any specific action a customer had to take in order to avail of the rebate.
In July 2017, the bank made several amendments to the disclosure document, including eliminating the “senior’s rebate” language” and presenting the charges for seniors specifically as a lower amount on the table of monthly charges by account type. However, it still gave no instructions on specific actions customers had to take to access the lower monthly charge for seniors.
“Since March 5, 2012, the lower monthly charge was provided automatically to seniors opening new accounts,” the decision said. “However, some existing eligible customers, and customers who became eligible, were not automatically charged the lower rate.”
In cases where the discount or lower rate wasn’t applied, the bank required eligible customers to request for the change to be applied to their account. As early as March 2013, the bank was aware that many eligible seniors had not requested the rebate they were entitled to, and responded by attempting to contact customers, providing training to staff, and posting information about the rebate process on its website.
It was only in 2018, following a customer complaint, when TD discovered that its disclosure document did not meet requirements set out in the Bank Act, and reported the issue to the FCAC. While TD initially maintained that only the July 2017 version of the disclosure document was non-compliant, FCAC staff later determined that even the document it used from March 2012 was in breach of the requirements.
“As a result, according to FCAC Staff, TD was in breach of the Disclosure Requirements from March 5, 2012 to October 16, 2018,” the decision said. Because the bank did not appear to have effective procedures in place to verify its charges against the disclosure provided to customers, FCAC concluded that it was negligent in not executing its regulatory obligations.
Because of that negligence, FCAC staff determined that TD harmed all the customers who were eligible to receive the discounted rates but did not. Over the six-period that the breach was ongoing, that number amounted to an estimated 500,000 clients, equating to excess charges of approximately $31 million.
In October 2018, TD sent letters to the potentially affected clients advising them that they were entitled to a reimbursement; by October 31, those customers had gotten reimbursed through deposits in their accounts or via cheque. Still, Robertson ruled that on balance, the bank should be sanctioned.
“[G]iven the length of time this issue was outstanding, the number of customers affected, the dollar amounts involved, the degree of negligence identified above, and the violation history, I find that the penalty amount of $400,000 is appropriate in these circumstances,” Robertson said.
While TD requested that Robertson not reveal the name of the bank in her decision, the FCAC commissioner determined that making the bank’s name public is an appropriate measure and a suitable specific deterrent.
“[T]he transparency of the publication of the Bank’s name in this decision will contribute positively to consumer confidence in Canada’s regulatory oversight of consumer protection and in the banking system,” Robertson said.