The Federal Court Sets Aside A $1.6 Million Administrative Monetary Penalty By The Commissioner Of The Financial Consumer Agency Of Canada

On January 15, 2026, the Federal Court released its decision in Community Trust Company v. Attorney General of Canada.¹ The decision marks the first time that an administrative monetary penalty ("AMP") imposed by the Commissioner of the Financial Consumer Agency of Canada ("FCAC") has been overturned on substantive grounds. The Federal Court found that the Commissioner erred in imposing an AMP of $1.6 million based on the retrospective application of a penalty maximum, and in finding that a related violation occurred under the legislation.²

Factual Background

In April 2023, the Deputy Commissioner of the FCAC issued a Notice of Violation to Community Trust Company ("CTC") under the Financial Consumer Agency of Canada Act (the "FCAC Act"). The Notice of Violation alleged that CTC contravened the following provisions of the Cost of Borrowing (Trust and Loan Companies) Regulations (the "Regulations") made under the Trust and Loan Companies Act through the disclosure it provided to borrowers entering into fixed rate residential mortgage agreements:

1. Section 6(2.1)(b), from January 1, 2010 to November 30, 2020, for failing to provide borrowers with an information box that included the types and amount of other fees set out in Schedule 1 of the Regulations ("Violation #1"); and
2. Section 8(1)(p), from January 20, 2007 to November 30, 2020, for failing to provide borrowers with an initial disclosure statement that included a fee to discharge a security interest ("Violation #2").³

As a remedy, the Deputy Commissioner proposed that an AMP of $1.6 million be imposed for Violation #1, and an AMP of $1.55 million for Violation #2.

Before the Commissioner of the FCAC, CTC admitted Violation #1 but disputed Violation #2. CTC also argued that the proposed AMPs were inappropriate on the basis that they would result in a retrospective application of amendments made to the FCAC Act in 2020, which increased the maximum AMP that may be imposed on regulated entities.

On October 30, 2023, the Commissioner issued a decision finding liability for both Violation #1 and Violation #2. The Commissioner imposed an AMP of $1.6 million on CTC for Violation #1, but declined to impose an AMP for Violation #2.

Pursuant to s. 24 of the FCAC Act, CTC appealed the Commissioner's decision to the Federal Court.⁴

On January 15, 2026, the Federal Court released its decision quashing both the AMP imposed on CTC for Violation #1, and the finding of liability for Violation #2.

Key Elements of the Decision

1. The Presumption Against Retrospectivity when Quantifying Administrative Penalties

Section 19(2) of the FCAC Act sets out the maximum AMP that the Commissioner may impose for violations of the Regulations. The current provision came into force April 30, 2020, and states that the maximum AMP is $10 million for a violation committed by a financial institution. Prior to the April 30, 2020 amendment to the FCAC Act, the maximum AMP that could be imposed was either $200,000 (in force between January 1, 2010 and May 23, 2012) or $500,000 (in force between May 24, 2012 and April 19, 2020).⁵

The Federal Court agreed with CTC that the presumption against retrospectivity applied to the legislative amendments to s. 19(2), and that the Commissioner could not rely upon the public protection exception to the presumption. As a result, the Court held that the Commissioner erred in applying the $10 million AMP maximum in the FCAC Act to the entirety of Violation #1, since 95% of the instances of non-compliance in Violation #1 occurred prior to the 2020 amendment increasing the AMP maximum to $10 million.⁶

The Federal Court's decision makes clear that, depending on the legislation at issue, an increase to an AMP maximum may be interpreted as only applying to violations that occur after it came into force, even where the violations continue a larger pattern of legislative non-compliance that began prior to the increase.

2. The Text Remains the Anchor of Statutory Interpretation

With respect to Violation #2, the Commissioner found that CTC was liable under s. 8(1)(p) of the Regulations for allegedly failing to disclose fees charged "in relation to" the discharge of a security interest. The Commissioner did so despite the fact that the wording of the provision stated that it applied to fees "to discharge" a security interest, and CTC did not charge the fees at issue "to discharge" a security interest, but only to produce a mortgage discharge statement at the time when a security interest was discharged.

The Federal Court found that the Commissioner erred in her approach to statutory interpretation by focusing on the context and purpose of the Regulations (i.e., full transparency by financial institutions to consumers) and, by doing so, not applying the actual text of the Regulations.⁷ In doing so, the Court relied on recent Supreme Court of Canada jurisprudence which holds that the text remains the anchor in a statutory interpretation exercise.⁸

Practical Takeaways

The Federal Court's decision in Community Trust offers timely and practical guidance to financial institutions and other regulated entities that may be the subject of AMPs:

1. For regulated entities who attract a statutory penalty that was amended over time, the decision encourages careful comparison of the chronology of the impugned conduct against the legislative history. The guidance from this decision is applicable well beyond the penalties set out in the FCAC Act.
2. It is—and has always been—important that regulated entities understand the meaning of the various provisions to which they are subject in order to ensure that they remain compliant. The Federal Court's decision reinforces that, in interpreting what those obligations are, the actual text of the legislation remains a central consideration, and is not subordinate to its context and purpose.
3. The proper legal characterization of a regulatory violation is a fact-driven exercise, and entities facing this question may benefit from the early involvement of counsel to articulate their position to the regulator and preserve arguments for an appeal.

Footnotes

1 2026 FC 58 [Community Trust].

2 Community Trust, ¶4, 71.

3 Community Trust, ¶20.

4 Community Trust, ¶23-27.

5 Community Trust, ¶8-9, citing Financial Consumer Agency of Canada Act, SC 2001, c 9, s.19(2).

6 Community Trust, ¶38-39.

7 Community Trust, ¶58-59, 61-62.

8 Quebec (Commission des droits de la personne et des droits de la jeunesse) v. Directrice de la protection de la jeunesse du CISSS A, 2024 SCC 43, ¶23-24.

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