Sales-focused culture
Financial watchdog says controls to mitigate sales risk at banks ‘insufficient’
Canada’s financial consumer watchdog says there are “insufficient” controls in place at the country’s biggest banks to prevent sales of financial products that are misrepresented or unsuitable for consumers, and the banks’ sales-focused culture elevates the risk that employees may flout consumer protection rules.
The Financial Consumer Agency of Canada (FCAC) released the findings Tuesday after completing a review of business practices across Canada’s Big Six banks following media reports last year alleging questionable sales tactics, such as selling services without the consent of customers.
The FCAC added it is investigating alleged breaches of rules of conduct — designed to protect consumers, and which banks are required to follow — that may have been identified during its review and will take action where appropriate.
“Banks are in the business of making money. We know that. But the way they sell financial products and manage employee performance, combined with how they set up their governance frameworks can lead to sales cultures that are not always aligned with consumers’ interests,” FCAC commissioner Lucie Tedesco said in a statement.
The review examined the Royal Bank of Canada, Toronto-dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada.
The FCAC said it did not find widespread mis-selling, defined as selling products that are unsuitable or where the consumer is provided with incomplete or misleading information, at the banks.
However, its concluded that retail banking culture is predominantly focused on selling and rewards employees for doing so and that increases the risk that client interests are not always given the appropriate priority.
The agency also said the controls these banks have in place to mitigate the risks of mis-selling are “insufficient” and “underdeveloped,” particularly compared to the banks’ robust corporate governance policies.
The Canadian Bankers Association said Canada’s banks are client-focused with a commitment to high ethical standards and complying with the law when providing products and services to help customers meet their financial goals.
“The six largest banks in Canada co-operated fully with FCAC and we are encouraged that the review found no widespread mis-selling and that banks get this right the vast majority of the time,” association president Neil Parmenter said in a statement.
The Canadian Foundation for the Advancement of Investor Rights and the Public Interest Advocacy Centre said the government should work toward having one, national, statutory ombudservice for financial services complaints that can issue binding decisions.
Marian Passmore, director of policy at FAIR Canada, said the rules are inadequate.
“There is inadequate protection for Canadians at banks and reform is needed. FAIR Canada calls for a best interest standard so Canadians get the advice they expect and deserve,” Passmore said in a statement.
The FCAC review was launched last April after CBC reported that some bank employees alleged they felt pressure to upsell, trick and even lie to customers to meet sales targets. The reports also prompted the House of Commons’ Finance committee to hold a series of hearings examining the allegations last June.
The federal banking regulator, the Office of the Superintendent of Financial Institutions, also last summer said it was reviewing domestic retail sales practices at Canada’s key banks, focusing on “risk culture” and “the governance of sales practices.”