FCAC finds big banks make ‘inappropriate’ product recommendations

Despite feeling pressured, or getting an inappropriate product recommendation from bank employees, most participants in a mystery shopping exercise reported having a positive experience.

The Financial Consumer Agency of Canada (FCAC) released Thursday the results of a mystery shop that was carried out in late 2019.  That exercise – which followed a 2018 review – aimed to examine consumers’ experience with front-line employees at the big six banks.

The 2018 review raised concerns about industry sales practices.

In the 2019 exercise, 74% of shoppers said their overall experience was positive, but many of those positive interactions also included “a concerning sales experience,” the FCAC said.

Among other things, the shoppers reported inappropriate product recommendations; confusing or misleading disclosure; that they felt pressured; or that the employee with whom they dealt didn’t seem knowledgeable or well-trained.

Nearly one third (32%) of the chequing account shoppers and 45% of credit card shoppers reported that bank employees recommended an inappropriate product.

Additionally, visible minorities and students had a higher proportion of concerning experiences than other shoppers.

“These findings raise questions about the relationship between customer experience and sales conduct, suggesting that customer satisfaction is not always a reliable indicator of good sales practices,” FCAC said in Mystery shopping at domestic retail banks.

“This reinforces the need for banks to use a variety of tools to effectively monitor sales practices in addition to their customer satisfaction surveys, so they can proactively identify concerning sales experiences and compliance issues,” FCAC said.

The findings confirm the importance of banks having comprehensive training programs, especially for frontline staff that deal directly with consumers, FCAC added.

“FCAC expects that banks will use their training programs to ensure staff are knowledgeable about the products and services they sell so they can provide consumers with clear, simple information that is not misleading,” it said, adding bank workers need to be trained to make recommendations that meet consumers’ needs, “without pressuring them to accept products they do not need or understand.”

“Employee sales targets and incentives should not conflict with these objectives,” FCAC said.

At the same time, the agency said that many of the concerns that were raised in the mystery shopping exercise will be addressed through new consumer protections that take effect on June 30, including an obligation for banks to offer appropriate products and services to their customers, improved disclosure requirements and tougher complaint-handling standards.

“The Financial Consumer Agency of Canada is there to protect consumers of financial products and services, but this is also a responsibility shared by the financial industry,” said Judith Robertson, commissioner at the FCAC, in a statement.

“The mystery shopping exercise revealed sales experiences that raise concerns for FCAC,” she added. “We expect banks to focus on the areas for improvement that have been identified as they implement Canada’s new Financial Consumer Protection Framework and ensure they consider the needs and abilities of consumers, including those in vulnerable circumstances.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.