Canada’s five largest banks are knee-deep in a public relations fiasco. The story is big and it is likely to continue growing.
It started on Thursday, March 9, with CBC Go Public breaking the news that three employees from a TD Bank in Vancouver had exposed the bank’s high-pressure sales tactics.
The next day CBC saw a flood of additional reports from disgruntled current and past employees.
One week later it was reported there had been nearly 1,000 emails from current and past employees from all of Canada’s top five banks saying they, too, had been subjected to the same kind of pressure.
The alleged issue is that bank staff have aggressive sales quotas and feel pressure to apply unethical, high pressure sales tactics, for fear of losing their jobs. There are allegations of illegal practices to sell additional services to unsuspecting clients.
The banks issued press releases reassuring the public that they are good corporate citizens and have high client-oriented, ethical, standards.
Sounds good in theory but that is inconsistent with the huge deluge of feedback coming from bank employees.
The story has many issues and downsides.
Friday, after the second story broke, TD Bank stock decreased in value by over 5 per cent, the largest single day decline since 2009.
There are other potential financial implications. Wells Fargo is a U.S. bank that was recently fined $185 million because of inappropriate sales misconduct.
Will Canadian banks face fines?
The Financial Consumer Agency of Canada (FCAC) announced they will start to investigate business practices among Canada’s major banks beginning next month.
This alleged sales practice misconduct is an embarrassment for Canada’s large banks. It is also an embarrassment for regulators who are meant to police bank activity.
How can a story that seems so significant be broken by the news media when it is
the regulator’s responsibility to monitor activities within the banks? You can be sure that many difficult questions will be asked of all who were in a position to regulate the banks.
Will Canadians use this news to jolt them to move some of their banking services to other alternatives, including online providers? Will it encourage politicians to open up more competition to the big five banks?
In my opinion the largest issue is credibility. Where there is smoke, there is often fire, and when hundreds of current or former staff members from the major banks across Canada say the same thing, it is safe to believe there are problems within our banking system.
The initial public relations news releases from the banks in my opinion were mistakes. Huge mistakes.
Why not be more forthright and acknowledge there seems to be a problem and assume a leadership role to investigate, find, and fix those problems.
The banks’ initial reaction sounded like a joint response from their lawyers and public relations teams.
What Canadians wanted was leadership and that was sorely lacking.