Banks beware: The Financial Consumer Agency of Canada (FCAC) is planning to get tougher on the way it monitors financial institutions.
The harder stance is the result of FCAC’s recent review of the domestic retail sales practices of Canada’s six largest banks.
“FCAC found that [the] retail banking culture encourages employees to sell products and services, and rewards them for sales success. This sharp focus on sales can increase the risk of mis-selling and breaching market conduct obligations. The controls banks have put in place to effectively monitor, identify and mitigate these risks are insufficient,” the agency wrote in a statement.
The agency first decided to investigate bank sales practices last year after reports that employees of Toronto-Dominion Bank and other lenders were using improper tactics to meet sales goals. FCAC went on to look into the sales practices at bank branches, call centers, mobile mortgage specialists and third-party sellers. It also reviewed more than 4,500 consumer complaints related to sales practices at financial institutions.
As a result of its findings, the country’s financial consumer watchdog plans to “implement a modernized supervision framework that will allow the agency to proactively ensure banks have implemented the appropriate frameworks, policies, procedures and processes to mitigate sales practices risk. FCAC will also increase its resources for supervisory and enforcement functions.”
The agency also plans to bolster its educational materials to keep banking customers well-informed about financial products and services, as well as inform them about their rights and responsibilities and the right questions to ask when purchasing financial products.
“Banks are in the business of making money, we know that,” FCAC commissioner Lucie Tedesco said in a statement, according to American Banker. “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.”
The FCAC said it’s investigating alleged breaches of market conduct obligations that may have been identified during its review.