More than 100,000 BMO clients paid fees that should have been waived, watchdog findings show
Bank of Montreal is facing a new regulatory hit after Canada’s federal consumer watchdog slapped the bank with a $4m penalty for years of improperly disclosed fees on discounted accounts.
The Financial Consumer Agency of Canada (FCAC) said it found BMO committed two violations of its disclosure obligations under the Bank Act on personal deposit accounts, according to a summary of proceeding published Tuesday.
FCAC said that from 2010 to 2024, BMO failed to disclose all applicable monthly plan charges on certain accounts and, between 2022 and 2024, failed to clearly explain when those fees would begin.
The violations stem from BMO’s 2010 Discounted Banking Programs for Newcomers to Canada, medical and dental students, Indigenous banking clients and participants in a home financing promotion.
According to FCAC, customers applying in-branch received written confirmations with incorrect start dates for fee waivers, so they were charged monthly plan fees that should have been waived or discounted.
FCAC said 101,091 customers were financially impacted.
The agency noted that BMO has provided refunds and interest to affected clients totalling more than $3m and, where funds could not be returned to accounts, made a charitable donation of more than $600,000.
The Canadian Press also reported that BMO itself reported the issue to FCAC and reimbursed customers before the penalty was announced.
Regulators flagged weaknesses in governance and controls.
FCAC said the root cause was inconsistent employee adherence to procedures and monitoring measures that failed to detect the problem, despite more than 500 customer complaints about the fees.
The $4m penalty reflects, among other factors, the degree of negligence FCAC attributed to BMO in preventing and detecting the error.
In its news release, FCAC stressed that accurate disclosure is a “foundational element” of the Bank Act’s consumer protection regime and urged all federally regulated financial institutions to review the decision and apply the findings to their own practices.
The Canadian action follows a separate US case.
Last month, CBC News reported that the US Securities and Exchange Commission said BMO agreed to pay more than US$40m to settle charges over alleged supervision failures in the sale of residential mortgage-backed bonds, including about US$3bn of bonds sold between December 2020 and May 2023 using distorted collateral metrics.
BMO, while not admitting or denying the SEC’s findings, agreed to pay US$19.4m in disgorgement, US$2.2m in interest and a US$19m civil penalty.
