Toronto’s financial district is seen in this file photo. The Financial Consumer Agency of Canada will begin a business practices probe in April, focusing on financial institutions’ business practices regarding express consent and disclosure when dealing with customers. (Galit Rodan For The Globe and Mail)
The federal consumer protection watchdog that oversees financial institutions says its next review will “focus on” recent allegations in news reports that some front-line staff at large banks may have broken rules to reach aggressive sales goals.
The Financial Consumer Agency of Canada (FCAC) will begin a business practices probe in April. The agency regularly conducts industry reviews, but this time it will zero in on financial institutions’ business practices regarding express consent and disclosure when dealing with customers.
Regulators have been more alert to issues of consent since U.S. bank Wells Fargo & Co. was fined $185-million (U.S.) over a scandal that revealed the lender had opened some two million unauthorized accounts. So far, nothing points to such large-scale misconduct at Canadian banks, but sales tactic are still being subjected to heavier scrutiny.
“The law requires that, in order to provide consumers with new or expanded products or increase their credit limits, financial institutions obtain their customers’ prior consent and disclose key information about the costs and charges of the products they are purchasing,” said Lucie Tedesco, commissioner of the FCAC, in a statement.
Ms. Tedesco added: “We will investigate and enforce any incidence of non-compliance.”
The FCAC has been investigating sales practices, particularly financial institutions that may sign consumers up for products or services without disclosing the cost and getting consent, on an ongoing basis. Over the last two years, the FCAC has received 142 complaints over issues of consent, and 51 over problems with fee disclosure. Of those, all but 13 were lodged against banks.
In early February, the FCAC sent a letter to financial institutions, released publicly on Wednesday, to “reinforce” its expectations that any interaction seeking consent “is clear, simple and not misleading.”
“These issues have been discussed in my recent meetings with the CEOs and boards of Canada’s leading banks,” Ms. Tedesco said in her statement on Wednesday.
But matters of sales tactics and customer consent have taken on a new sense of urgency over the last two weeks after the Canadian Broadcasting Corp. published a series of stories citing unnamed employees at Toronto-Dominion Bank, who complained that pressure to meet lofty sales targets and “squeeze profits” from customers may have led some staff to act unethically.
Last Friday, TD’s share price plunged 5.6 per cent in a single day, to $66 (Canadian) – its largest dip in eight years. In a statement released last Sunday, TD said the bank “does not believe certain recent media coverage is an accurate portrayal of our culture, or that it reflects the experience of most of our colleagues, but we take the concerns very seriously.”
In its latest story, the CBC says it has received nearly 1,000 e-mails from current and former staff at Canada’s five largest banks describing intense pressure to reach sales targets.
But so far, bank analysts are mostly reserving judgment.
“We are inclined to put this situation in the ‘concerned but not panicked’ category for now,” said Sohrab Movahedi, an analyst at BMO Nesbitt Burns Inc., in a research note on Monday. “The market’s rush to judgment, while understandable, may have been an over-reaction.”