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Too big to trust?

TD comes under fire after investigation reveals that bank employees misled customers

Here’s a good reason not to trust the big banks

One of Canada’s biggest banks is under fire after a CBC investigation revealed the unethical lengths that the bank’s employees went to sell financial products and services to unassuming customers.

Exactly one week ago CBC’s Go Public published a report quoting three TD Bank employees who claimed they were under “incredible pressure” from their employer to rake in profits by signing customers up for products and services they actually didn’t really need.

Considering the way TD’s stock has reacted, it’s pretty clear that this has the potential to become a financial scandal on par with Wells Fargo’s fake account saga, where bank employees created millions of fake bank accounts for its customers, as they stood to collect a commission from every account they created.

Last Friday, TD Bank posted its biggest lost since 2009 — its stock plunged more than 5.5 percent in a single day, wiping out almost $7 billion of TD’s overall net worth.

A second story was published by Go Public on the same day that TD’s stock went into free fall. The allegations in that piece were even more egregious — some TD Bank employees violated the law out of fear of being fired if they did not meet their sales goals.

If you’re a TD customer, be vigilant

In the second CBC investigation, one teller who had worked for several years at a branch in Windsor, Ontario alleged that he increased people’s lines of credit by a couple of thousand dollars, without them knowing, just to get “sales revenue points”, a violation of the federal Bank Act.

So picture how this might affect you — you walk into a TD branch, apply for a line of credit for perhaps $5,000 and you’re quoted an interest rate of say six percent. If you max our your line of credit, you don’t just owe the bank five grand, you owe it five grand PLUS interest. 

Now assume your trusted bank officer arbitrarily increases your line of credit to $10,000. If you’re using a bank card to access this line of credit, and you’re the type of person that doesn’t frequently check your bank balance, you might keep swiping your card above and beyond your $5,000 limit. You now owe the bank even more money, when you didn’t agree to borrow that amount of money to begin with.

(Keep in mind that a bank officer’s role is not just to issue anyone a line of credit for any amount — it’s to determine how big of a line of credit a person can afford to take out, depending on his or her income. No bank wants to deal with bad debt).

Now this same scenario of accidental overspending would probably take place if a TD bank officer deliberately increased your overdraft protection amount or credit card limit, which is exactly what another teller at an Ontario TD branch told CBC she did, in order to meet her sales revenue target.

The Unethical Bank?

According to a 2016 consumer banking survey by Ernst & Young, 40 percent of the global public has reduced their dependence on big banks because of a lack of trust in their business practices. The survey showed an increasing number of people opting to invest in alternative financial institutions that place more of an emphasis on ethical investing. In fact, only 14 percent of people surveyed felt confident in the banking industry, a fact that is not altogether surprising, considering the frequency of incidents like this one, where a client’s financial goals are abandoned by the bank for the sake of profits.

Many Canadians rely on bank officers to tell them how to go about managing their money. When the incentive to take out a line of credit, or get an increase in your credit card limit is governed by the “sales revenue points” of a bank officer, it is difficult to know how much you, as a consumer, can actually afford.

“Debt is a product for banks. When they offer you a line of credit, or a mortgage, they’re making money on that. For the most part, I wouldn’t trust banks to tell you what you can afford,” personal finance expert Shannon Lee Simmons told VICE Money.

“TD is in the trust business”

TD has been charting record profits every year for the last five years. In fact, after an extremely successful 2016, which saw the bank earn almost $9 billion, TD’s latest quarterly earnings report for 2017 showed a profit 14 percent higher than what analysts had expected, effectively making TD the biggest bank in Canada, overtaking the financial behemoth that is RBC.

Perhaps jolted into action by it’s Friday stock plunge, TD Bank CEO Bharat Masrani finally issued a statement responding to the CBC’s allegations, saying that while the CBC story does not reflect the work culture at TD, the bank is nevertheless taking these allegations seriously. 

“TD is in the trust business,” said Masrani. “We know we must earn our customers’ trust before we earn their business.”

TD has yet to respond to VICE Money’s request for comment.

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Cover: Ethan Tennier-Stuart/Vice illustration

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