Bank did a bad thing; don't know how to respond to Bank
May 11, 2012 7:03 AM   Subscribe

My bank, in Canada, committed what feels like fraud. Not sure of next steps.

Five years ago I bought a house for the first time, with a partner. I did the negotiations; partner paid the mortgage. For five years partner paid "insurance," which partner assumed to be the mortgage insurance we were required to have with our smaller downpayment.

We just went to renew the mortgage and discovered -- no! Partner had been paying for a life insurance policy on himself.

When we got the mortgage I dealt with the branch manager, who I ended up thoroughly disgusted with over an extremely hard sell on a life insurance policy. I was pregnant at the time and she was not above suggesting I was making an irresponsible parenting choice; it was not a pleasant or professional sort of sales attempt. Partner is a civil servant who already has good life insurance through his job. There is no point at which I (or Partner) would not have been really adamant about NO LIFE INSURANCE.

But apparently, branch manager went and signed us up anyway...!!

When this came to light during the mortgage renewal process I was horrified. I have investments with this bank as well as the mortgage and my Visa and chequing. I feel violated and do not trust the bank.

Unfortunately things have been unusually, unrelentingly busy, and we did not manage to start the mortgage renewal process until days before it needed to be done, so we stuck with the bank for the new mortgage even as this came to light.

I was also about to negotiate a home equity line of credit to make some home repairs. I've put this on hold.

After a few inquiries, bank returned the stolen insurance payments, dumping a little over $4k into Partner's account.

There has been no sort of formal apology, no mention of interest on the money, no 'Manager [no longer at the branch] has been demoted,' nothing else. Here's what we stole; now do you want your HELOC?

What's appropriate here? What Canadian bank-oversight body should know about this?

This is Big Canadian Bank with green signage. I am waffly on whether or not I need to switch banks; it feels like if one would pull this, any of them would. (And I am in a rural area and not awash in bank choices.) But just leaving things as is doesn't feel right. Thoughts?
posted by anonymous to Work & Money (12 answers total)
While I haven't dealt with them myself, the Ombudsman for Banking Services and Investments may be the place to go next. They have a FAQ.
posted by mhoye at 7:36 AM on May 11, 2012

The bank gave the money back. For a bank, that's a painful and sincere form of apology. The branch manager is gone, so there's nothing they could do about her even if they wanted to. How much interest do you figure you missed out on? Is it enough to fight over?

Did the branch manager sign you and/or partner up for the insurance, or did one of you sign a document without realizing what it was for? If it's the former, there might be something to pursue. If it's the latter, maybe chalk up the lost interest as tuition for learning that you really do need to read through the documents and understand what you are signing, even if they throw a ream of forms at you and you are pressed for time and life is hectic.

There's no reason why you still can't get a home-equity loan through some other institution. You can move accounts too. Even if the other banks are no better, you might feel better.
posted by Longtime Listener at 7:44 AM on May 11, 2012 [7 favorites]

I agree that all the big banks are essentially the same. If it's feasible to move to a credit union in your area, I'd suggest doing that. For me, the loss of convenience is balanced out by the clear conscience.
posted by no regrets, coyote at 8:02 AM on May 11, 2012 [1 favorite]

Your lawyer in the conveyance should have walked you through all the mortgage documents...was the life insurance option in there? Or did the bank somehow tack on the premium payments without you signing off?

I don't know that I would switch....I have gone to banks to notarize mortgage documents (for HELOCs, for example) and found on occasion that the bank employee hasn't even told their client that it *was* a mortgage. That was the case in each of the major Canadian banks I attended. There are bad apples and ignorami everywhere.
posted by Pomo at 8:15 AM on May 11, 2012

You can escalate your complaint to their Customer Care department, though I suspect that's how you got your money back. The recommendation to go to the Ombudsman is an option, though it's likely they will see that the bank paid for their mistake and reimbursed you and will consider the case closed.

This sort of thing isn't common, but it's something I've definitely seen happen a couple of times.

You will not find out what happened to that manager. That information is considered private and they will not disclose it to you, so I wouldn't expect that.

The best way to deal with this is to stop dealing with them, and tell them clearly why you are doing so.
posted by smitt at 8:15 AM on May 11, 2012

Wow, this a major violation of trust. I've not heard of anything like this before in Canada. One other avenue if all else fails is to go to the local newspaper. At least this might spur the bank's management to tighten up their oversight.
posted by storybored at 8:46 AM on May 11, 2012

I work for a Canadian Bank (though not a green coloured one) and am familiar with the comment complaint resolution processes that exist in Canada.

Your bank will have a policy for how to resolve concerns and that information should be available in a brochure and likely on their website. There wou'd find contact info for their Office of the President and their Ombudsman.

If you want to go beyond your bank the first step is the Ombudsman for Banking Services and Investments with their website

After that your next step is the Financial Consumer Agency of Canada with their website

You might be successful in getting some back interest. You probably will get a letter of apology. You will not be told anything about the employment status of the manager you had met with as that would be a breach of privacy. If you want interest you'll have to go through the proper channels. If you just decide that you don't like the way they do business, banks are very competitive and even with mortgage penalties another bank may be worth looking into.
posted by GilvearSt at 8:50 AM on May 11, 2012 [1 favorite]

I'm amazed that the bank gave you back payments, even without added interest. Yes, contact the Ombudsman as described above, but you're doing a lot better than people generally do when they go up against a bank.

I'm not clear on one point: when you say the manager signed you up anyway, is there any piece of paper with your signature(s) on it about insurance? If there is, the $4000 refund may be the best possible deal from the bank, although I wouldn't give up hope for interest payments and an apology. If there is no paperwork showing you agreeing to the monthly payments, then that would be fraud on the bank's part.

If you did sign paperwork, I believe that you got a hard sell and were overwhelmed, but you would share responsibility for this mess. Mortgage paperwork is a huge deal and should be read carefully, and reviewed with a lawyer in the cool-down period, typically 10-30 days after signing. Any contract you sign in Canada should have its cool-down period defined; always ask if you can't see it. (I'm not saying this to blame you -- I've made similar financial mistakes myself -- but I'm putting this out there as a warning for anyone else looking at a mortgage.)

The CMHC insurance (required for any down payment under 20%) is bundled into your mortgage. It is not a separate monthly payment. Check the paperwork for your original mortgage: you should see that itemized.

I have a mortgage with a Canadian bank with a big green logo, and they tried to sell us a life insurance package (10 year term, for the full list value of the house, not the amount remaining after the down payment). We refused it and got a similar policy from an insurance company we were already dealing with for about $25/month.

(For any Canadian reading this: if you do want a life insurance policy to cover your outstanding mortgage -- which is not a totally bad idea if you have no other life insurance and have dependents who want to stay in your house after you die -- NEVER get the policy directly from a bank. This Marketplace episode shows how these policies are often cunningly worded so that the expected benefits are not paid out after death.)

Keep an eye on interest rates if you want to switch your mortgage elsewhere. You will pay some kind of penalty for switching in the middle of the term, but it's worse for you if rates go down instead of up. Research your costs with an online calculator first -- again, your mortgage paperwork should explicitly include the terms and penalties your current bank will impose.

A credit union or an online bank like ING may be a better fit for you. Good luck!
posted by maudlin at 9:00 AM on May 11, 2012 [1 favorite]

Switch to a credit union, you are in Canada and credit unions are a viable option for most Canadians, the difference in the level of service will likely surprise you.
posted by Cosine at 9:36 AM on May 11, 2012

Anon: "There has been no sort of formal apology, no mention of interest on the money, no 'Manager [no longer at the branch] has been demoted,' nothing else. Here's what we stole; now do you want your HELOC?"

Truthfully, the bank is in no way obligated to share with you any details about how employees are or aren't disciplined. There are a ton of privacy and liability concerns there.

Anon: "After a few inquiries, bank returned the stolen insurance payments, dumping a little over $4k into Partner's account."

How were these explained to you? Were they? Honestly, this is where things start to seem really dodgy to me. I would not touch this money. Don't spend it, don't move it out of the account. At the very least, you should get a full accounting of where this money is coming from and what it is supposed to represent.
posted by mkultra at 11:02 AM on May 11, 2012

Unless the bank uncovers a systemic practice of misselling insurance, this isn't going to be a regulatory issue. Instead take it to the Ombudsman who'll be able to decide if you should be compensated (probably a small-ish token payment) and get an apology. It won't cost you anything to do this, but the Ombudsman can't regulate/police/punish the bank.
posted by essexjan at 11:18 AM on May 11, 2012

If you've not yet committed to the bank, I suggest finding and dealing directly with a mortgage broker (I've used with good service but there are plenty and there is likely to be one physically located in your nearest city if you prefer face to face interaction) and having a frank discussion of precisely what you need and what you will accept.

Mortgage brokers are paid by financial institutions and private lenders for bringing business their way, but I've found them sufficiently easy to work with and less scummy than the Big 5 to happily use them.
posted by thatdawnperson at 6:47 AM on May 12, 2012

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