In the past, financial institutions would not provide borrowers with the complex formulas and examples needed to accurately calculate penalties. All banks use some variation based on posted rates from, in some cases many years ago, which are not posted for the borrower to see. There are a lot of legalese and vagueness surrounding today’s penalty formulas.
As of Nov 5, 2012, all financial institutions will have to provide full penalty disclosure to borrowers, including interest rates used for comparison purposes, full description of the formula used and a time frame for which the penalty is valid. All financial institutions will now be required to have calculators posted on their websites to help provide a “reasonable” penalty quote. They will also be required to fully disclosure any and all fees ie. Admin fees, discharge fees, transfer fees, reinvestment fees, etc…
This is great news for the consumers and it is about time we see more transparency. It has been a long battle for the Financial Consumer Agency of Canada (FCAC) and one they will continue to monitor for compliance reasons on an ongoing basis.
Full Department of Finance decision here
We’d love to hear you thoughts. Do you think these new changes will benefit the consumer? If there was one other changed you would implement, would would it be?
