At least two of Canada's largest banks audited their own sales practices last year, taking extra measures after a damaging sales scandal engulfed U.S.-based Wells Fargo & Co.
Major banks in Canada have come under closer scrutiny in recent weeks after media reports alleged that some front-line staff felt pressure to meet ambitious sales targets. With complaints rising, the Financial Consumer Agency of Canada (FCAC) has promised to review sales practices, focusing on bank employees' obligation to get customer consent and disclose fees and costs when selling new products.
Domestic banks are under pressure to keep boosting profits in the face of slow economic growth and high consumer debt loads. The main engine for growth at most Canadian banks is the retail arm, which serves consumers whose expectations are rapidly changing as banking moves increasingly online.
At Bank of Nova Scotia and Toronto-Dominion Bank, executives have already looked inward, adding extra scrutiny to their own sales cultures ever since American regulators fined Wells Fargo $185-million (U.S.) for creating an estimated two million unauthorized accounts. Both Scotiabank and TD claim that separate internal reviews have not turned up any widespread issues.
Bank of Montreal, Canadian Imperial Bank of Commerce and Royal Bank of Canada each declined to say whether they reviewed sales practices more closely than usual.
Two sources confirmed that TD began an internal audit last November. One source familiar with the process said the bank hasn't found "anything systemic," though the process is still ongoing. The findings are regularly reported to the board of directors.
In recent weeks, TD has fielded slightly more escalated customer complaints, but only a small subset allege any misconduct, and the overall volume of calls to the bank has stayed steady. So far, regulators have not called for a third-party audit beyond the FCAC review, a source confirmed.
A TD spokesperson declined to comment on the internal review. The bank will hold its annual meeting of shareholders on Thursday.
Last fall, Scotiabank undertook a detailed review of sales practices and implemented a new system to gauge customer feedback. The bank found no systemic issues, but declined to comment further. In an earlier statement, a bank spokesperson said: "We monitor and enhance sales practices and process on an ongoing basis."
In early February, the FCAC sent a letter to financial institutions to "reinforce" its expectations that sales practices should be "clear, simple and not misleading." Even so, earlier this month, the agency saw a spike in complaints and queries from consumers. Between March 13 and 19, the FCAC received 431 calls and e-mails about bank sales practices – up 146 per cent from the prior week – most of which appear to be complaints about express consent or sales practices, as well as questions about the FCAC's role. The following week, the number of complaints fell back to more normal levels.
The surge came after reports by the Canadian Broadcasting Corp. quoted a small number of unnamed current and former employees who claimed to have bent the rules under pressure to reach sales goals.
More broadly, consumer complaints against financial institutions have been rising for some time. The Ombudsman for Banking Services and Investments (OBSI), which helps resolve disputes between banks and customers, has seen a steady increase in banking-related complaints since 2013, including a 6-per-cent bump in 2016. The OBSI opened 290 new cases last year.
"We have strong governance and controls over our sales practices and consistently conduct reviews to ensure employee behaviour aligns with our standards," a BMO spokesperson said in an e-mail.
A statement from RBC said the bank monitors "our sales practices through regular engagement with our employees, managers and partners across RBC."
And a CIBC spokesperson said the bank strives "to be open and forthcoming, provide clear explanations of our products, services and fees, listen to client concerns and provide solutions that are easy to understand and flexible to individual needs."
Some complaints may stem from rapidly changing attitudes about bank branches. Over the past five years, routine transactions have steadily moved online – 80 per cent or more at some big banks. In response, banks are redesigning branches to give advice, and retraining tellers who are being asked to meet challenging sales goals.
In 2012, TD hiked compensation for front-line customer service staff as it added to their responsibilities. They are judged on three key factors – individual behaviour, team or branch performance and customer feedback – but individual metrics are given less weight, a source said.
Each teller gets coaching every week, and managers sometimes observe employees at work to give feedback. Yet it is expected that only about two-thirds of staff will meet sales goals in any quarter.
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