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When a federal consumer watchdog sent mystery shoppers to hundreds of branches of Canada’s big banks and asked them to secretly take notes on their interactions, it found Indigenous or racialized consumers were more likely to be pitched financial products that didn’t fit their circumstances. Those individuals were also more frequently offered overdraft protection and balance protection insurance.

The research, commissioned by the Financial Consumer Agency of Canada (FCAC), detected a number of recurring issues with bank employees’ conduct, which also included unclear communication and exerting pressure on undecided customers.

The instances of troublesome behaviour represented a minority of interactions between bank staff and the mystery shoppers. But the findings raise red flags, according to the report.

“FCAC expects all consumers to have similar sales experiences and ones that result in a positive outcome for them,” said Rana Abu Naameh, director of regulatory guidance and co-ordination at the agency.

For the study, the FCAC engaged a third-party firm to send individuals posing as customers to more than 700 bank branches at Canada’s six biggest banks: Bank of Montreal; Bank of Nova Scotia; Canadian Imperial Bank of Commerce; National Bank; Royal Bank of Canada; and Toronto-Dominion Bank. The research, which focused on chequing accounts and credit cards, took place between October and December, 2019.

The study found that undercover shoppers who identified as racialized or Indigenous persons were more likely to report what the FCAC called “concerning” sales experiences involving inappropriate recommendations, unsolicited product pitches or confusing communication.

Students also described unsatisfactory interactions more frequently than other shoppers.

Nearly three-quarters of the secret shoppers rated their experience with bank employees as positive, with 17 per cent reporting neutral impressions and 9 per cent saying they had negative interactions.

“Canada’s banks are client-focused with a deep commitment to high ethical standards and complying with established laws and regulations,” the Canadian Bankers Association said in a statement via e-mail.

Separately, spokespersons for several of the big banks said they put customers first, while also adding they would review feedback about staff conduct from the FCAC.

“TD colleagues work hard every day to earn the trust of our customers,” a spokesperson for the bank said via e-mail. “We have also brought in enhanced training and education programs to better serve Indigenous, Black and other diverse communities, including sessions focused on our shared responsibility to interrupt conscious and unconscious bias.”

But even some of the secret shoppers who reported a satisfactory experience described practices the FCAC said should raise concern. Over all, in 15 per cent of interactions involving chequing accounts and 20 per cent of those involving credit cards, shoppers said that bank employees made inappropriate product recommendations.

One frequently misplaced pitch: premium credit cards. The FCAC found that 28 per cent of credit card recommendations were for so-called “premium” cards that may come with higher costs as well as perks – such as travel rewards – that not all consumers can take advantage of. Such cards typically have minimum individual or household income thresholds. But in 80 per cent of cases, bank staff promoting them never asked the mystery shoppers about their income, the report notes.

In 28 per cent of interactions, the stealth shoppers also said they were offered products beyond what they’d asked for.

Most frequently the unprompted recommendations involved overdraft protection, which can help consumers avoid declined transactions and extra costs when they don’t have enough money in their account to cover a payment or withdrawal. Banks typically charge a monthly or pay-per-use fee for this optional service.

Notably, 32 per cent of secret shoppers who identified as a visible minority or Indigenous person were offered overdraft protection compared with just 18 per cent of the other shoppers.

A similar trend emerged for credit card balance protection insurance, which helps borrowers pay off their balance in case they lose their job, become disabled or die, among other scenarios. Although just 6 per cent of card shoppers were offered such coverage, racialized and Indigenous customers were more than three times as likely to hear the pitch, the research shows.

New federal rules coming into effect at the end of June will require banks to have new procedures in place to ensure that what they offer matches customers’ needs, the FCAC said.

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