D. The Contract
| Author | M.H. Ogilvie |
| Profession | LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University |
| Pages | 180-188 |
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The general legal background against which the standard-form account agreement operates is the large volume of Anglo-Canadian common law built up over the past two centuries, some of which is reflected in the express account agreements in daily use. However, much of the common law is not reflected in the account agreement, so it must be implied into the bank and customer contract. The contract, then, is partly express and partly implied from both the common law and the Bank Act. The account contracts used by Canadian banks, as well as other financial institutions that engage in deposit taking, are very similar and applicable not only to individuals but also to joint account holders, corporations, unincorporated associations, and partnerships with small variations. Like all standard-form contracts today, they favour the proferens, the bank, at the expense of the customer, and persons who wish to have access to banking services have little real choice in the marketplace generally. In contrast to the United Kingdom, where the bank and customer relationship is also governed by a voluntary industry code, the Good Banking Code of Practice,19there is no such code operating in Canada to supplement the express contracts.
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The Bank Act provisions relating to the bank and customer relationship both establish part of the general background in law of the express contract and require certain matters to be incorporated into those express contracts. First, the Act permits banks to accept deposits from any person whether or not that person is qualified by law to enter contracts, provided there are no prior claimants to those funds.20
Secondly, any bank charges for keeping accounts must be disclosed by the express agreement on the opening of the account, in advertisements about accounts, and whenever the charges are changed throughout the operation of the account.21
This disclosure must include the interest rate, how the rate is calculated, and the amount of any other charges for services provided within the account. Thirdly, a bank is required to provide to a customer a copy of the account agreement when an account is opened.22
Fourthly, banks are required to open low fee and no-minimum-balance accounts for low-income individuals who can satisfy certain identification requirements set out in the regulations.23
Fifthly, banks are required to disclose all borrowing costs, including the interest or discount rate, method of calculation, and any other costs in relation to loans at the time of the loan and in any advertising.24
Ac-count overdrafts are characterized as loans in law,25as well, of course, as lines of credit granted on account opening. Such disclosure is also required in relation to credit cards.26
Sixthly, banks are required to establish internal customer complaints procedures and to provide information in writing to customers
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about those procedures and how to contact both the Ombudsman for Banking Services and Investments (OBSI) and the Financial Consumer Agency of Canada (FCAC). Banks typically include that information as a term of the account contract, but are also required to provide the information by brochures and on a website, and to send such to any person who so requests in a written form.27
Seventhly, a bank may not charge or receive any sum for the provision of products or services unless made by an express agreement with the customer or by court order.28
Eighthly, maintaining a minimum credit balance may not be a condition for a loan to a customer except by express agreement.29
Ninthly, banks are required to cash Government of Canada cheques without making a charge for doing so, provided the individual can satisfy stipulated identification requirements.30
Ninthly, banks are prohibited from coercing a customer into obtaining a product or service from the bank or its affiliates or another person identified by the bank as a condition for obtaining any other product or service from the bank unless that product or service is offered on more favourable terms.31
A bank may require that a product or service offered by another person meets with the bank’s approval, which shall not be withheld unreasonably.32
Banks are required to disclose this prohibition on tied selling to their customers in plain language by an express statement available at the branch, on all its websites, and any other points of service.33
Although the provision does not make explicit reference to accounts, accounts appear to fall within it.34
Tenthly, the Bank Act requires banks to give customer and public notice of an intention to close any branch at which it opens retail accounts and disburses cash to customers.35
Notice must also be given to the FCAC at least four months prior to the proposed closure date for
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an urban branch and six months for a rural branch.36
The regulations concerning notice are detailed and designed to ensure maximum publicity not only to affected customers but also to the community in which the branch is located. The FCAC is permitted to require the bank to hold a public meeting to discuss the proposed closure, but whatever the outcome of that meeting, the bank remains legally entitled to close any branch it wishes to close. It would appear that the purpose of the meeting is to permit local pressure to be brought to bear on the question with possible outcomes of a reversal of the decision to close or the provision of alternative banking arrangements either through an ABM or a visiting banking facility or sale of the branch to another financial institution. The underlying goal is to ensure that every potential customer has access to a branch of any financial institution within a travelling distance of ten kilometres.37
Eleventhly, when a customer dies, a bank is required to transmit any deposit or any property held as security or for safekeeping to the appropriate person as identified by an affidavit and either a will or other testamentary instrument or grant of probate or administration, and the bank may refuse to do so until it receives documentation it regards as appropriate.38
Twelfthly, banks are required to make all disclosures of information regarding their products and services and any policies in that regard to the public as required by the regulations.39
No such regulations have been made yet by the Governor in Council.
Thirteenthly, the Act makes provision for unclaimed balances in an account. Where no transaction has taken place and no statement of account has been requested or acknowledged by a customer for ten years from the day of the last transaction or communication or, in the case of a fixed term deposit from the day of termination, then the bank will pay to the Bank of Canada by 31 December in each year the amount of the deposit, together with any interest earned on it. The bank is thereby discharged from all liability.40
The person entitled to receive payment may request it from the Bank of Canada, which is obliged to pay over the funds received, together with information to identify the customer and interest calculated in such manner as the Minister of Finance determines for a period not exceeding ten years from the day
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on which the amount was received by the Bank of Canada.41
Prior to remitting the funds to the Bank of Canada, the bank is required to mail to the deposit holder at the last recorded address or electronic address if designated by the person, a notice that the amount is unpaid.42
This notice is to be given during the month of January...
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