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CIBC giving refunds to 1.4 million customers for improperly charged credit-card fees

Canadian Imperial Bank of Commerce is making amends with about 1.4 million customers after revealing that they were improperly charged fees for exceeding credit-card spending limits over a 14-year span.

The bank, which is Canada’s fifth-largest lender, also discovered some clients may have been incorrectly charged higher premiums on optional creditor insurance, according to a notice posted to its website.

Both issues have been fixed, the bank says, and were confined to accounts in Canada. But a CIBC spokesperson declined to say how the improper charges occurred or when the problem was detected. That leaves a lingering question about how such an issue went undetected from February of 2003 until February, 2017 – the period for which refunds are being granted. Credit cards are an important and highly profitable part of CIBC’s core retail-banking business, which held credit-card balances of $12.5-billion as of April 30.

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The average refund customers will receive is about $50, including interest. CIBC enlisted help from an unidentified independent firm to validate the refund amounts it owes from improper charges. All told, that could mean CIBC is required to shell out roughly $70-million in refunds, although the bank has not disclosed the total cost of its efforts to remedy its errors.

The disclosure of a long-standing issue involving credit cards comes at an awkward moment for CIBC, which is part of a consortium with Air Canada, Toronto-Dominion Bank and Visa that last week made an unsolicited $250-million bid to buy loyalty-rewards company Aimia Inc., the parent company of Aeroplan. Aimia rejected that bid on Thursday, even after Air Canada and its partners raised their offer to $325-million. But under an existing contract, CIBC remains a key credit-card partner in the Aeroplan program, which complements the bank’s proprietary Aventura rewards program.

Clients whose credit cards were improperly charged will be notified and have those fees automatically refunded between July and October, although CIBC expects most will receive a credit by August. Discussions in online consumer forums suggest some customers have already received letters from CIBC in recent weeks, outlining the issue and specifying how much they will receive in refunds. A small number of former clients who no longer have CIBC credit cards will be reimbursed with cheques.

The issue was first reported by a local newspaper in Prince Edward Island, The Guardian.

A spokesperson for the Financial Consumer Agency of Canada (FCAC) declined to say whether it is probing the CIBC credit-card issue and does not comment on investigations.

But the agency has dealt with similar issues before. In 2016, an unnamed bank that updated its credit-card systems had problems crediting payments to customer accounts, pushing some customers over their credit limits and causing them to be unfairly charged over-limit fees. The bank reimbursed those customers and the FCAC chose not to impose a fine for the error.

The FCAC’s guidelines on over-the-limit fees for credit cards also state that a financial institution can’t charge a client for exceeding their limit if the charge that puts them over the line is a temporary hold on funds – for example, a customer buying fuel at a gas station might have a hold placed on their card when paying at the pump to ensure they have sufficient funds.

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A spokesperson for Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, confirmed it is aware of the issue, but directed inquiries to the FCAC.

CIBC will report its latest quarterly results on Aug. 23.

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