CIBC Fined $3 Million for Billing Irregularities Related to Lost or Stolen Credit Cards

The new CIBC logo displayed in the lobby of its headquarters in Toronto on Oct. 25, 2021. (Evan Buhler/The Canadian Press)

The Canadian Imperial Bank of Commerce (CIBC) has been fined $3 million for billing irregularities affecting more than 130,000 credit card accounts over an 18-year period, according to a decision issued by a national financial watchdog.

In her decision published on June 22, Judith Robertson, commissioner of the Financial Consumer Agency of Canada (FCAC), said the CIBC was found to have garbled accounts for customers who reported lost or stolen cards—in some cases improperly charging interest and fees.

“Following an internal investigation, CIBC confirmed that credit transactions for some deactivated lost or stolen cards were not transferred in a timely manner during the period of 2003–2021 and that credit transactions for some defrauded cards were not transferred in a timely manner during the period of 2018–2020,” wrote Robertson on May 1, as first reported by Blacklock’s Reporter.

Credit cards are deactivated whenever they are reported as lost, stolen, or defrauded, she added. In such circumstances, customers are provided with replacement cards, and as part of the activation process, credit transactions are transferred from the deactivated account to a new account.

“Until the credit transactions were transferred from the deactivated account to the active account, the supplementary statement for the active account did not accurately reflect all transactions, as required,” the commissioner wrote.

“The account balance, amount due, credit limit available and estimated time to pay were also incorrect. In addition, the credit transfer delays resulted in some customers being improperly charged interest, over limit fees and/or insurance premiums.”

‘Damaging’

According to FCAC’s analysis, a total of 132,658 accounts were affected. Delayed credit transfers amounted to $20.9 million, and $1.5 million in “improper fees, interest and premiums” were charged to those accounts.

CIBC attributed the cause to “employee error,” “ineffective quality assurance program,” and “an automated process that failed to transfer credit transactions.”

The FCAC had evaluated the “harm” caused by the bank’s violation of the Cost of Borrowing (Banks) Regulations to be “Level 2 or Significant Harm.”

CIBC disputed FCAC’s assessment. It argued that the delay did not cause financial harm in and of itself, as the credit transactions were eventually transferred. But it did acknowledge that the financial harm “was only present where the delay resulted in additional charges being improperly imposed on customers.”

Robertson reasoned that the appropriate level should be “Level 1 or Some Harm” after taking into consideration that CIBC had refunded the “improper charges” to its impacted customers as of Sept. 21, 2021, among several other factors.

The commissioner did not condone the breach by the bank.

“There is no dispute on the evidence about the breach,” she said. “I find that it is appropriate in these circumstances to impose a $3.0 million penalty for the Violation.”

Robertson added that the penalty imposed on CIBC will serve as a deterrence against negligence by other banks in the future.

“It is damaging to confidence in the financial system, and the reputation of the Bank, if breaches of consumer protection provisions are allowed to remain undetected and unremedied for extended periods,” she said.