Terms and Conditions: How Canadian Banks Override Their Customers' Property Rights

Customer agreement contracts give the Big Five banks the right to do just about whatever they want with your money

You know those “I have read and agree to the terms and conditions described in this document” boxes we all click before opening new accounts? Well it turns out that there’s actually stuff in those documents. And in the case of Canadian banks, that stuff could one day come back and bite us.

The primary function of a retail bank is to reliably safeguard your deposits and the movement of your money. Doing that well requires significant institutional competence in a lot of tough domains and a commitment to transparency.

Canada’s “Big Five” banks (TD, CIBC, RBC, Scotiabank, and BMO) historically enjoyed reputations for smart decision-making and conservative money management policies. Even if their best years might now lie behind them, the Big Five still consistently produce multi-billion dollar profits. And they’re pretty good at protecting your money from crime.

But will they, as institutions, necessarily treat you fairly? Based on the contents of their customer agreement contracts, it seems that’ll depend entirely on how they feel on a given day. To illustrate what I mean, I’m going to show you key clauses from the user agreement documents for each of the Big Five banks. Later, I’ll contrast those with what I found in the legal agreements of some of the larger credit unions.

I’ll let you draw your own conclusions about what motivates the lawyers working for those businesses. Sure, they’ll probably say that, when the time comes, they’ll act in good faith and only apply their rights in extreme cases. But that’s of small comfort, because there’s absolutely nothing forcing them. And in fact, when the time did come in early 2022, banks reportedly froze hundreds of accounts on deeply questionable grounds.

TD Canada Trust

We’ll begin with the agreement document you’re expected to sign for TD. Here are some excerpts (emphasis mine):

For example, we may restrict Account activity or use of any Services, or close your Account, for any of the following reasons:

• We believe that your Account has suspicious, improper, illegal, possible fraudulent, or unauthorized activity.

• We believe you have engaged in suspicious, improper, illegal, possible fraudulent, or unauthorized activity.

• You breach these Terms or any other terms and conditions related to the Account or any Services.

• Your Account operates in a way that we find unsatisfactory or contrary to our policies.

• We reasonably believe that we must do so to protect our employees and/or customers from physical harm, harassment, or other abuse.

So TD can “restrict account activity” - meaning: they could shut your account down and prevent you from accessing your money - based on the feeling (“we find…”) that you’ve behaved badly (“improper…unsatisfactory”).

And while no reasonable person would justify actual harassment of a bank employee, the word itself is far too vague for a legal document. After all, it could be reinterpreted to include a wide range of acceptable - if mildly annoying - behaviour.

Bank of Montreal

Here’s how your rights appear in the eyes of BMO’s lawyers:

We may close your account, or refuse to release funds in your account without notice to you, including, without limitation, if required by law or at our sole discretion if at any time you commit, or we suspect you may have committed, fraud or other illegal act, we determine that you pose an unacceptable level of legal, reputational or other risk to the Bank, you violate the terms of any applicable agreements, you use the account for any improper or unlawful purposes, there is suspicious activity in the account, or you operate the account in any unsatisfactory manner.

Just like TD, BMO reserves the right to decide that you’ve been an unsatisfactory or improper citizen and, as a result, impose arbitrary punishment.

Canadian Imperial Bank of Commerce

I’m sure you’re already seeing the pattern here: