Weekend Reading: Banks Behaving Badly (Again) Edition

CBC Go Public continues to do excellent investigative reporting and this week they caught banks behaving badly again, this time misleading and upselling customers on pricey credit card insurance. Known as balance protection insurance, this product charges a hefty premium (typically around 99 cents per $100 balance) to “protect” cardholders from missed payments as a result of job loss, illness, disability, or death.

But as 72-year-old Jolante Groves found out, the coverage comes with so many exclusions that it can be difficult to make a successful claim. Jolante’s husband George suffered a stroke in February that left him incapacitated and unable to make payments on his outstanding credit card balance. The card issuer, Canadian Tire, demanded payment and refused to allow Jolante to make an insurance claim on her husband’s behalf because the card was in his name alone.

Balance Protection Insurance

CBC’s Marketplace took their hidden cameras into some of Canada’s big banks in Toronto to investigate how bank employees marketed balance protection insurance when a customer signed up for a new credit card. If you’ve seen Marketplace’s or Go Public’s previous bank investigations before then the results will shock but not surprise you.

A BMO employee offered balance protection insurance but when questioned about it seemed to have little grasp of the product she was selling. A Scotia employee inaccurately claimed the coverage would pay off an entire credit card balance if someone lost their job. And a CIBC employee added balance protection to a credit card before the customer had a chance to decline the insurance.

That was also my experience with CIBC this summer when I applied in person for the CIBC Aventura Visa Infinite card. We never discussed balance protection at all. Several weeks later, before receiving the credit card, I got a letter from CIBC and Sun Alliance Insurance describing the balance protection coverage already enabled on my card. I immediately called to cancel it, but it made me wonder if this was common practice at CIBC.

Several anonymous bank customer service representatives revealed to CBC how they are under pressure to make sales targets and sell balance protection insurance to everyone who takes out a credit card. They’re misleading clients and often signing them up for the coverage without their knowledge.

Balance protection insurance is part of a list of useless products that are designed to enrich banks and dupe unsuspecting customers. It should be banned along with other insidious products such as mortgage life insurance, extended warranties, and deferred sales charges.

This Week’s Recap:

This week I compared the best high interest savings account options at Canada’s big banks, online banks, and credit unions.

Over on Rewards Cards Canada I described my CIBC Aventura Card adventure in further detail.

Weekend Reading:

Is there a problem with the way we envision retirement? An MIT study’s results were surprising and a little concerning.

The “Financial Independence, Retire Early” advocates are using assumptions about future market returns that are unrealistic.

A group of younger workers, devotees of the FIRE movement, are seeking ways to duck mistakes made by prior generations. (Wall Street Journal subscribers)

You’ve heard of stocks for the long run, but there are 30-year periods where bonds have outperformed stocks. Michael James answers the question of what we do with that information.

The Wealthy Barber David Chilton has partnered with RBC Wealth Management to raise awareness about estate planning options – specifically the idea of taking advantage of corporate executors:

“I am a big believer in the benefits of corporate executorship. In fact, I refuse to take on the executor role for even my closest friends’ wills. If you’re wondering why, you’ve probably never been an executor,” says Chilton.

If you have both a mortgage and an investment portfolio you might have wondered if it makes sense to use some of your investments to pay off your mortgage. Ben Felix explains what’s optimal and realistic in his latest common sense investing video:

Rob Carrick says this is a definitive sign you have overborrowed and owe too much.

Surprisingly, Carrick then makes the case for 30-year mortgages as a financial stress reliever for new home buyers. There is a sensible argument inside:

“Here’s a compromise if you’re gagging on the idea of paying that extra interest: Set up the mortgage with a 30-year amortization, but make extra payments so that you end up paying the amount you would have if you went with 25 years.”

Michael Batnick explains that where the market goes in your first ten years can have a disproportionate impact on how you think about investing for the remainder of your life.

Finally, one of my favourites – read Martin Short’s nine categories for self evaluation.

Have a great weekend, everyone!

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  1. Norman on November 10, 2018 at 5:33 pm

    I can also vouch for the fact that you are not alone in your experience with CIBC. I few years back when my daughter turned 18 she wanted to get a credit card so we went to CIBC. Balance insurance was never discussed when we outlined what she needed.
    My daughter was told to sign at a number of spots marked ‘x’ by the representative (I know, I know I should have read the whole contract).
    After all the signing was done the representative said, “There if you lose your job you won’t have to pay off the balance.” It should have twigged right there because I remember thinking that was a bit odd.
    Anyway, just to be on the safe side I checked my daughter’s statement when she first received one and sure enough there was a charge for the insurance.
    I had my daughter phone and cancel the insurance (if I remember correctly it took more than one call).
    I was so mad that I wanted to go in with my daughter to talk to the branch manager and complain about their deceptive practices but my daughter was of an age where she figured it would be just ‘tooo embarrassing’ to be with old Dad while he vented his spleen on the bank manager, so we just dropped the matter at that point.

  2. Frank Pelsoczi on November 10, 2018 at 6:53 pm

    …”If you don’t have the ability to fly first class once in a while, you have probably done something wrong….”

    I guess , then most of us did everything wrong.

  3. Anne on November 11, 2018 at 5:50 am

    Good Day!
    I wanted to add my voice to Yolante’s about insurance on a credit card. I had a similar story when my husband had a stroke and I needed to pay bills. He had a line of credit with insurance on it from RBC. I went through HELL trying to talk to the bank and get information, pay his bills etc. I wouldn’t wish this on my worst enemy. My husband is recovering from his illness but the fear, frustration and embarrasment are still with me. I was fortunate to have help from social worker at the hospital and the nurses helped me as well. I just wanted to add my voice and if anyone else is in this situation, don’t give up!

  4. D monette on November 11, 2018 at 8:47 am

    another complaint; I just paid my lawyer$2,900 dollars to have my mother’s account probated ….Now the NATIONAL BANK OF CANADA says that they cannot release my mother’s mother to me. The advisor said that policy is that the BANK must now send it to their side where they will do whatever???? I must wait one month or more to get my money … i am the sole beneficiary, and executrix of her will. WHY the wait, i do not understand. The advisior did not really have an answer. So why get the Supreme court of Ontario do the probate and then I am refused instant money transfer. I think this is almost illegal. I am waiting patiently…….. IT ANGERS ME so much since the bank said to have the probate done. Well, its done….. and not do I need to give them blood!! would you know if this is policy to withhold the release after probate is done.

    • Norman on November 11, 2018 at 5:01 pm

      Regarding D Monette’s experience as executrix: What you are experiencing is not necessarily that unusual. I was executor for my father’s estate and I had differing experience depending on the bank. TD was no trouble at all but then I was joint on my father’s bank account and I had most of my own assets with TD as well.
      However, RBC was another story. I had no prior relationship with them and they informed me that they would have to send a copy of the probated will to their estate department (presumably in Toronto) before any assets could be released to me. If I remember correctly it took perhaps a couple of weeks before I finally received payment from them.

  5. Owen @ PlanEasy.ca on November 12, 2018 at 11:54 am

    That’s awful. There should be regulation for these types of products (or they should be just outlawed all together). It makes zero sense to pay $1 per $100 in balance for this type of protection. There are other less expensive ways to get the same result.

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