Ruling prohibits banks from sharing mortgage data

Banks should not share clients’ mortgage information without consent when asked by other financial institutions trying to collect on a judgment debt, ruled the Ontario Court of Appeal. Such disclosure would violate the Personal Information Protection and Electronic Documents Act.

The Jan. 6 decision marks the first time Canada’s mammoth privacy law, PIPEDA, has been successfully used in an appellate court to stop financial institutions from sharing information of this type with third parties.

Citi Cards Canada Inc. v. Pleasance
involved the credit card company looking to collect on its judgment of about $11,000 through a forced sheriff’s sale of the debtor’s home. Information from the mortgage holders, The Canada Trust Co. and The Toronto-Dominion Bank, was needed to complete the process, but they would not provide the proper documentation without consent of the client due to privacy regulations spelled out in PIPEDA.

Citi argued the two mortgage holders were required to release the information.

Admitting the case posed a “knotty and interesting question” for the relationship between debtors and creditors, Justice Robert A. Blair says PIPEDA doesn’t allow the sharing for information in this case, even though there is a judgment against the debtor. He adds Citi should find alternative ways to collect on its judgment debt.

“If the appellant’s argument is correct, any organization could disclose personal financial information about the individual to interested third parties, without that individual’s consent, any time there is an outstanding judgment against the individual,” Blair wrote in his decision for the panel, including justices Russell Juriansz and Harry LaForme. “Such a result would effectively negative the protection afforded to the privacy rights of individuals pursuant to PIPEDA.”

Some banks were freely sharing the information in the past, and the court is basically telling them they have to stop, says James Morton, a partner at Steinberg Morton Hope & Israel LLP in Toronto. While lower courts had dealt with the issue in the past, it’s the first time it had come up to the appeal level.

“It’s a very important decision, and it’s the first time we have had a clear ruling on PIPEDA applied to [this type of] bank information which is shared quite freely,” says Morton. “It really strengthens PIPEDA.”

While some banks might have volunteered the information in the past based on a notion of implicit consent by the client, the court’s decision means not only that they don’t have to share the information, as Citi was trying to imply in its case, but that in fact they are prohibited from releasing the information, says David Young, a privacy lawyer with McMillan LLP in Toronto.

“The court said you have other remedies to obtain that information, and PIPEDA is not the avenue by which you can get it,” says Young. “It is a significant case, because it correctly analyzes how PIPEDA could apply to this situation.”

Young adds by going after the banks, Citi was likely trying to circumvent costly remedies it had under civil litigation rules.

Both lawyers say they don’t expect the case to be appealed.

Morton says the court interpreted PIPEDA correctly, but there could be pressure to change the legislation to exclude this case.

“It’s a policy matter,” he says. “I wouldn’t be surprised if we see some legislative changes to PIPEDA to . . . collect the information.”

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