Finance Committee on June 5th, 2017

[The Chair, Liberal, Wayne Easter]

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you very much, Mr. Chair.

Just quickly then, Ms. Tedesco, you said earlier that you've launched an investigation; that's ongoing. Do you have an idea of approximately when you might come to a conclusion in that process?

[Lucie Tedesco]

Richard, do you want to answer that because you're leading the exercise? We will have initial findings by the end of this year, but our work will be in phases. We have two streams, and one of the streams has two phases. The second phase, I believe, will be completed by June 2018.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

On the topic of the investigation and how it's going to be reported, will it be reported on a case-by-case basis, or will it be more of a generalized report? Will it be something that you will be giving to the Minister of Finance and Finance Canada for their review prior to the Bank Act review, or is there some sort of public mechanism? I would like to know whether the information that your team will gather, and its conclusions, will ultimately go back to the government quietly, or whether there is going to be a very public reporting mechanism.

[Lucie Tedesco]

We intend to publish our findings.

[Richard Bilodeau]

Perhaps I could just speak to the investigation part of your question. It's very important to note that the industry review itself of bank sales practices and their impact on employees' interactions with consumers with regard to their expressed consent is one thing. Any investigations happening either as a result of our work there, or separately—because we have received complaints, we've asked for information from the banks—coming out of that are separate from their review and will be dealt with separately. So, as those investigations progress we will follow our normal procedure. I can assure you that it is a priority for the agency and for my group to investigate those; and we will publish decisions according to our publishing principles as a matter of course. That activity is separate and they don't go through the Minister of Finance or the Department of Finance. It's entirely done within the agency.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you for clarifying.

Thank you.

[The Chair, Liberal, Wayne Easter]

Just further on that point, a number of the letters that I've received relate to employees who may have gone to their human resource sections, and think they were dealt with unfairly. I don't believe that's your area of jurisdiction. Where do those folks go who have a complaint in the system? Sometimes it's personal relationships, I understand that, and sometimes it's fact. How do we deal with those folks? As I said earlier, we're in a quagmire here because there are some provincial things, there are some federal...federal labour law, provincial labour law, banking practices, and their rights. There are also individual rights of employees who feel they've been wronged, who can't find a recourse for how they've been wronged. I can tell you that some of those letters are fairly strenuous in their point of view, where they feel now they're in the health care system because of how they were treated at work. Does anyone have any suggestions on where those individuals can go to get recourse?

[Darren Hannah]

Sandy, do you want to walk through the employee recourse system?

[Sandy Stephens]

Within a bank there's a myriad of ways for an employee to escalate a concern. They can go to their direct manager, they can go to HR, but they also have an internal ombudsman system which is independent, and someone can look at their complaint. Also, we're a federally regulated institution so we're under the Labour Code, and in certain instances there is a complaint mechanism under that code as well.

[The Chair, Liberal, Wayne Easter]

That's good information. Thank you.

Mr. Dusseault, one quick question, and then we'll go to the other side and Mr. Grewal.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I would like to hear from the FCAC officials about the incentives and performance objectives, which seem to be part of an ideal world for the Canadian Bankers Association. According to that association, consumers are very well served by a system that rewards strong performance: the more financial products that are sold, the more the employee is paid.

In your opinion, is this kind of practice by the banks, which want to sell more and more products even if consumers do not really need them, a good way to serve Canadian consumers?

[Lucie Tedesco]

We are fortunate to have colleagues elsewhere in the world who have conducted similar reviews. Through their work, they found that incentive programs that focused on sales objectives rather than the greater consumer interest had indeed led to poor sales practices and poor results for consumers.

They also found that incentive programs were a key factor in establishing a culture in an organization, as Mr. Hannah said, since that truly illustrates the behaviours that are valued by institutions. This is a finding that was made elsewhere in the world.

They found that certain aspects of governance were lacking. The controls in place were not sufficient and there were not enough rules.

[The Chair, Liberal, Wayne Easter]

Thank you both.

For the last round of questions, Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for testifying today.

Ms. Tedesco, you mentioned after what happened at Wells Fargo that you did proactive research on what other sales techniques are being done by Canadian banks.

Did you actually go to the branch level and witness how a customer comes into the branch, and interactions that a customer may have with a customer service rep, better known as a teller?

[Lucie Tedesco]

If I said that, I misspoke.

[Raj Grewal, Liberal, Brampton East, ON]

No, I'm asking about that part of your report.

[Lucie Tedesco]

At this point, there is no report.

[Raj Grewal, Liberal, Brampton East, ON]

This was in the response to the testimony you gave on what happened after Wells Fargo.

[Lucie Tedesco]

Yes.

[Raj Grewal, Liberal, Brampton East, ON]

You said that you looked at current sales practices.

[Lucie Tedesco]

We looked at our complaints in the same area, so complaints in the areas of express consent and disclosure. We went back three years to see what they looked like, and we determined that the number remained stable year over year. Even despite the fact that there was no red flag, if you will, from our complaints perspective, we continued to monitor incoming complaints.

We decided to focus our next industry review on sales practices to gather more information about sales practices. We knew what was going on in the United States, and we wanted to find out what was going on in Canada.

[Raj Grewal, Liberal, Brampton East, ON]

As part of your report now, will that include somebody going into a bank and having interactions with customer service representatives?

[Lucie Tedesco]

We are definitely going to do some mystery shopping type of exercise.

I can let Richard speak to that.

[Raj Grewal, Liberal, Brampton East, ON]

Perfect, that's fine. I just wanted to make sure it was included.

My experience as a customer of one of the big banks is that every time I go into different branches, I'm always being told, “Oh, why don't you buy the unlimited thing? What are you going to do with this balance in your account? You should invest it in mutual funds.”

That's all well and good because banks are profit driven. I want to say that we're not picking on the banks here. We're saying that at a certain point they're taking advantage of vulnerable Canadians who do not have the financial literacy to make these decisions.

Banking happens on a weekly basis. Let's say you come from my riding in Brampton East where the classic bank model still exists in which people do their banking in person. Then, TD goes over and above—that's an example of one of the banks—and they hire people who speak fluently in Punjabi and Hindi and Cantonese and Mandarin. They can speak directly to seniors or new immigrants who are working really hard, and they open accounts in these institutions. Because of where they come from, they don't trust that their money is going to be deposited at a machine or by doing it online, so they come and hand over the cash to see it being deposited into their bank. I feel that those are the types of customers who are vulnerable to deceptive sales practices and we need to do a better job of protecting them.

Further, when it comes to protecting consumers, something that I find completely unbelievable is the fact that with advisor spelled with an “o”, and adviser spelled with an “e”, one is a regulated title, and one is an unregulated title, yet banks use them both. If you know about this, why hasn't that been put to a stop right away?