Take account of your bank accounts
Watch for mistakes, make sure offer is truly a deal and don’t be afraid to complain
Last January, Neil Aronoff went to open a new RBC chequing account. At the time, he learned he had a $17,000 personal line of credit at RBC that had not been used since 2013.
“The banking adviser told me that the line of credit was still active and had a terrific rate that was no longer being offered,” he said.
Aronoff would get the prime lending rate, then 3.45 per cent at large Canadian banks — an attractive deal for a loan not secured by real estate. His personal line of credit at another bank was at a rate of prime plus 3.25 per cent (6.7 per cent in total).
So he decided to transfer his debt to RBC and borrow for other purposes, too. He had an outstanding balance of about $12,000 when the bank sent a letter, dated June 28, 2018.
“Based on the annual review of your Royal Credit Line, and in accordance with your Royal Credit Line agreement, we are writing to let you know about a change we are making to the interest rate on your Royal Credit Line account,” it said.
Effective Aug. 7, RBC would raise his rate to prime plus 3 per cent. Since RBC’s prime rate had risen to 3.7 per cent after the Bank of Canada raised its benchmark rate on July 11, he would be paying 6.7 per cent.
“I found this to be suspect,” Aronoff said. “I’ve had this line of credit for about 10 years and it seems that only now, when I have a substantial debt on it, they are upping the rate with a meagre 30 days’ notice.”
He reached out to the adviser who openEed his account. Could she speak to the credit department to find out the reason for the sudden increase? Had there been any negative credit transactions to justify it?
“The Bank of Canada rate does not jump 3 per cent at a time. Why should my credit line?” he asked.
“The adviser didn’t respond to my email or phone calls. Eventually, I got through and she gave me an explanation about the bank offering promotional rates that could end, just like that. It made little sense to me.
“The account was opened in January, and the letter with the annual review came at the end of June. I wouldn’t have started this line of credit again if it were not for the bank adviser telling me about the great rate it had,” Aronoff added.
Two other things went wrong with his RBC chequing account and line of credit.
“I was being charged monthly account fees when I had been told I had a no-fee promotion for six months. It was difficult to reach my adviser, who had moved to a different branch, but this complaint was resolved and I got back the fees.
“Also, the interest payments on my line of credit were supposed to be taken from my new chequing account.
“I had money in the account to pay the interest, but it wasn’t going to cover the interest.
“I started getting calls and letters from RBC and couldn’t understand the reason.
“Later, I discovered that my line of credit (opened in Montreal) had not been linked to my chequing account, and I made sure the accounts were linked.”
I thought Aronoff had a legitimate complaint.
The RBC adviser had encouraged him to use an existing line of credit at a lower-than-market rate but didn’t warn him that the rate could rise so quickly and by so much.
While sorting through papers recently, he found an RBC letter promising him a prime plus zero interest rate for 12 months, starting Sept. 29, 2017.
Why didn’t his adviser tell him in January that he was getting a temporary teaser rate? When I asked RBC to review his case, the increase was reversed within one day.
“Due to an administrative error, Mr. Aronoff’s Royal Credit Line was incorrectly repriced,” said bank spokesperson AJ Goodman.
“We regret any inconvenience this experience may have caused him and have restored his Royal Credit Line to its original interest rate.”
So, what can you learn from this story about an unhappy banking experience? Here are a few tips.
Keep an eye out for mistakes. Canada’s Big Five banks are well-managed, but things don’t always go smoothly for customers. Read your monthly statements and ask questions when you spot potential errors.
You have to be your own advocate. Employees try to be helpful, but they have to make money for the bank. They don’t always put the customer’s interests first.
Watch out for mis-selling. With a focus on sales targets and incentives, banks may steer customers into unsuitable products and services while providing incomplete, unclear or misleading information.
Remember that banks are not your friend. After a ninemonth review, Canada’s bank regulator found the sales culture posed risks to customers. It told banks to prioritize consumer protection, fairness and product suitability.
Ask about promotional rates. When you see a lowerthan-usual rate on loans or a higher rate on savings, be skeptical. Is there a time limit? How long will the great rates last? And where will they go afterward? Without this information, you risk making poor decisions about moving your money around.
When in doubt, complain. All banks must, by law, have a complaint-handling process in place for consumers. The Financial Consumer Agency of Canada has a search tool that lets you type in a company name and find the complaint process.
Ellen Roseman is a columnist based in Toronto covering consumer affairs. Reach her at eroseman@thestar.ca.