FCAC to probe sales practices at smaller and medium banks

Canada’s financial consumer watchdog plans to expand its probe of business practices - which found that the country’s six biggest banks had “insufficient” controls in place to prevent sales of products that are misrepresented or unsuitable for customers - to the next tier of small and medium sized financial institutions.

The Financial Consumer Agency of Canada examined 4,500 complaints as part of its latest review of the Big Six banks, the findings of which it released Tuesday, and found grievances about other institutions as well, said the agency’s commissioner Lucie Tedesco.

It plans to “cascade” down its probe to other federally-regulated institutions, such as smaller banks, federal credit unions and federal trust companies, she added.

“There are issues with the medium or smaller banks... Our review may not be as intensive, we will have to see what measures they have put in place once we get there,” Tedesco said in an interview.

The FCAC commissioner’s comments come as the agency released the findings of an intensive review of business practices across Canada’s Big Six banks, launched last April following media reports alleging questionable sales tactics such as selling services without the consent of customers.

The probe did not find widespread misselling, defined as selling products that are unsuitable or where the consumer is provided with incomplete or misleading information, but concluded that there are “insufficient” controls in place at the country’s biggest banks to prevent or mitigate the risk.

The review examined practices at the Royal Bank of Canada, TorontoDominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, and involved interviews with more than 600 bank employees and reviews of 100,000 pages of bank documents.

The FCAC also found that the banks’ sales-focused culture, with variable rewards and compensation for sales performance, elevates the risk that employees may flout consumer protection rules.

As technology has allowed consumers to do most of their banking online, banks now expect their front-line customer facing roles in branches, call centres and specialist channels to sell products and services to consumers,

“There are issues with the medium or smaller banks... Our review may not be as intensive, we will have to see what measures they have put in place once we get there.”

The Financial Consumer Agency of Canada commissioner Lucie Tedesco