Star’s view Time to crack down on bad banks,

The Bank of Montreal was the big winner among Canadian banks last quarter, with an increase in profit of 40 per cent over the same period last year. You needn’t feel bad for the competition, though. The Royal Bank’s profits were up 24 per cent, CIBC’s by13 per cent. With a net gain of $2.5 billion, TD Bank’s rose by a not-shabby 4 per cent.

How did they do it, especially at a time of low interest rates and increased capital requirements? A series of reports from CBC News has shed some light on their success. It seems profits were boosted in part by a troubling combination of unethical, indeed exploitative, sales practices and inadequate consumer protection.

Last week, three TD Bank Group employees told CBC News about the “incredible pressure” they and their colleagues are under to meet sales goals variously described as “aggressive,” “unrealistic” and “insane.” “When I come into work,” one said, “I have to put my ethics aside and not do what’s right for the customer.” They say that to keep their jobs they have no choice but to pressure clients to buy unnecessary services or even illegally sign them up for products without their knowledge.

In its defence, TD insists all of its employees are required to follow the company’s code of ethics. However, in the days since the story broke, hundreds of employees, not just from TD, but from all of the major banks, have come forward with similar allegations.

Sales quotas are so high, they say, that the only way to meet them is to aggressively upsell, or worse, surreptitiously extend customers’ credit limits or charge them for other new products without their consent. (The Bank of Montreal, Royal Bank and CIBC also deny the claims.)

It’s somewhat troubling that these problems came to light through journalism rather than through government oversight. On Wednesday, in response to the allegations, Canada’s financial consumer watchdog announced that it would launch a review of practices among the major banks. This is a welcome move. But Ottawa must also look beyond this investigation to address the larger inadequacies of the regulatory scheme and its enforcement that make the whistleblowers’ claims sadly plausible.

We have long known that banks are able to get away with a great deal without customers or anyone else noticing. Last year, CIBC reported itself to the Ontario Securities Commission because it had been overcharging its clients for 14 years, bringing in $73 million in unearned revenue. In July, Scotiabank struck a similar deal, repaying $20 million in errant fees. In both cases, the overcharging might have gone on indefinitely had the banks not turned themselves in.

A key problem, as many financial experts argue, is a lack of transparency. Bank statements are inscrutable to most people, in large part because financial institutions are not required to clearly present and explain charges. Consumers should not have to decode the information that is provided in their bank statements. As the whistleblowers make clear, people are being charged for services they don’t need or know about. This demands action.

Ottawa is currently reviewing the Bank Act, the federal legislation governing financial institutions. The process is meant to be completed in 2019 and should be seen as an opportunity to strengthen regulations, improve transparency and ensure watchdogs have the resources and mandate they need.

In the meantime, consumers would be wise to check their statements carefully, banks ought to get their house in order and the federal financial watchdog should use its power to make sure that happens.

Consumers should not have to decode their bank statements