Hardik Patel knew something wasn’t right when a Royal Bank customer service agent told him there was only one way he could access his online RRSP account — he’d have to open a chequing account, with monthly fees.
He knew that wasn’t true. Patel, who immigrated to Toronto from India four years ago, had already accessed his RRSP many times.
Frustrated that he was being sold a product he didn’t need, he asked to speak with a manager.
Patel wanted assurances that RBC staff wouldn’t try to upsell someone else, and also objected to a remark the agent had made about his accent.
“They were pushing me to buy something I didn’t need,” he told Go Public.
Patel’s experience mirrors some findings of a recent report, years in the making, from the Financial Consumer Agency of Canada (FCAC) which suggests racialized bank customers are more often pitched inappropriate financial products.
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The report was prompted in part by a Go Public investigation into high-pressure sales tactics inside the big banks.
Five years ago, in the wake of a story featuring three TD Bank employees who spoke about what they felt was unethical sales pressure, more than 3,000 current and former employees at Canada’s biggest banks told Go Public they, too, were under immense pressure to sell products and services that people didn’t need and often couldn’t afford.
They described feeling desperate to meet ever-increasing sales targets and being under pressure to increase customers’ lines of credit, push credit cards with high annual fees and secretly open chequing accounts for customers, among other things.
The FCAC conducted a national review in 2018, which found a focus on sales targets was increasing the risk of banks placing sales ahead of the interests of customers.
It then hired a private company to send mystery shoppers into 712 branches of the big six banks in every province at the end of 2019.
The resulting report says they tested how frontline employees at Bank of Montreal, CIBC, Scotiabank, National, TD Bank and RBC sell products and services, and found “concerning” experiences involving inappropriate recommendations, unnecessary product pitches and confusing communication.
“The mystery shopping exercise revealed sales experiences that raise concerns,” said Judith Robertson, commissioner of the FCAC in a news release.
An expert in business and economics says she’s heartened the banking watchdog detected those red flags.
“They have every right to be concerned about this kind of sales culture,” said Caroline Shenaz Hossein, an associate professor of global development at the University of Toronto Scarborough.
The report also says undercover shoppers who identified as racialized or Indigenous were more often pitched financial products that were inappropriate and experienced unsolicited product pitches.
“This is not a shocking surprise to anyone who has been following the news,” said Shenaz Hossein.
“There is … systemic racism occurring in Canada’s commercial banking system.”
Pushed ‘premium’ credit cards
During Go Public’s investigation in 2017, all the big banks repeatedly denied they used high-pressure sales tactics and said that customers always came first.
But the mystery shopper investigation found that nearly a third of all credit card recommendations were for “premium” credit cards — which often have hefty annual fees and typically require a minimum individual or household income.
Yet in 80 per cent of cases, bank staff promoting them never asked shoppers about their income.
Questions about spending habits were few and far between, too. Only 16 per cent of employees who recommended a premium card asked about a shopper’s spending habits, said the report.
According to Shenaz Hossein, that’s because those details would affect an employee’s ability to push a sale, should they discover the individual isn’t a good candidate for the product.
“Once they go down that line, then they have the obligation not to offer those product lines,” she said.
FCAC says in the report banks “have a responsibility to ensure frontline staff … make recommendations that meet consumers’ needs.”
Sales targets and incentives “should not conflict with these objectives,” it said.
‘Sell, sell, sell’
Undercover shoppers who identified as racialized or Indigenous were offered overdraft protection, which involves monthly fees and accrues interest, at nearly twice the rate as other shoppers.
They were also more than three times as likely to be offered balance protection insurance — which covers the minimum monthly payment on a card’s outstanding balance, but which comes with high fees and so many exclusions it’s often difficult to make a claim.
Bank employees are “making this assumption that Black, racialized and Indigenous people are more likely to default or overextend themselves,” said Shenaz Hossein.
The regulator considered the findings troublesome, too, saying in the report that “more can be done by banks to ensure that the demographic groups at higher risk are protected from experiencing concerning sales practices.”
The report also says banks have a responsibility “to ensure frontline staff are effectively trained,” citing instances when employees lacked the proper knowledge to deal with shoppers.
Shenaz Hossein says that wrongly puts the blame on the staff.
“What [the FCAC] should be thinking about is … why is it that there is so much pressure for them to sell, sell, sell, that it actually compromises the bank’s integrity and commitment to taking care of the financial health of Canadians?” said Shenaz Hossein.
She studies and advocates for banking alternatives such as credit unions, that are member-owned and not mandated to make a profit.
The findings also failed to surprise Duff Conacher, co-founder of Democracy Watch, a non-profit citizen advocacy organization that focuses on government and corporate accountability.
“The FCAC could have discovered [racial discrimination] 20 years ago if they had done a mystery shopper survey,” he said.
He notes U.S. banks have tracked racial discrimination for years.
“For 40 years they have required banks to track and disclose their service lending and investment records by race, gender, income level and neighbourhood, and disclose the data, which proves discrimination again and again,” he said.
“They’re required to take corrective action. And we [Canada] are decades behind.”
The Canadian Bankers Association did not respond to Go Public’s questions about the survey’s findings, but in a statement said banks have “a deep commitment to high ethical standards” and have worked hard to earn the confidence of millions of Canadians.
Agent’s remark ‘inappropriate’
Patel escalated his complaint at RBC which confirmed, in a letter, he should not have been told he had to open a new chequing account and that “appropriate coaching” had since taken place.
“I think they should have said more about what they’ll do to prevent this from happening to someone else,” said Patel.
The letter also said that management had reviewed his call with customer service and determined that the agent’s comment regarding Patel’s accent “was inappropriate.”
RBC said it regretted the incident and that “proper measures” had been taken to prevent anything similar in the future — but didn’t spell out those measures.
“What [the RBC agent] said was racist,” said Patel. “I want this to stop. So tell me what actions you’re going to take to make sure more people don’t get treated this way.”
Dissatisfied, Patel filed a complaint with the Human Rights Commission. Last month, he and RBC reached a settlement before his case was heard.
He’s not permitted to discuss the details or comment on what happened, because the bank required that he sign a non-disclosure agreement.
In a recent statement to Go Public, an RBC spokesperson said, “Discrimination — in any form — is against everything we stand for and is not tolerated.”
It also said that the bank continues to provide employee training “to deepen awareness of the concepts of diversity, bias and racism.”
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