The federal government enacted new legislative laws for banking procedures back in March to restrict the mingling of Canada’s banking side and the banks’ insurance side. These new rules were put in place after Finance Minister Jim Flaherty asked the banks 4 years ago to “stop doing insurance on bank websites,” a call that was by all accounts ignored.
Steve Masnyk, public affairs manager for the Insurance Brokers Association of Canada (IBAC), notified the press by mentioning the latest complaint in this area this time against Canada’s largest bank, RBC. The complaint is centred on a letter from RBC’s marketing department on the insurance side of the bank promoting a deal because of the recipient’s was an RBC credit card holder.
The practice of promoting car or house insurance through the bank by using information from the banking account of a consumer is prohibited under these new laws which put RBC and the rest of Canada’s banks on thin ice when it comes to doing this type of business. The letter is has been sent out to at least six different customers according to the IBAC who say they have copies of the same letter addressed to different recipients.
Part of the letter mentions that if the customer’s RBC Rewards credit card is used to pay the insurance premiums, they are entitled to RBC Rewards points; according to the IBAC this is “black and white clearly prohibited by the regulations.” Masnyk says what happens from here on out may never be known as the IBAC sent the letters to the Finance Ministry’s OSFA office but their response was one mentioning the need for confidentiality under the bank act. Basically Masnyk believes that only the banks will be made aware of how this issue is to be resolved.
But he says it is surprising that the OSFI won’t give any public statement to alert other consumers of what the banks might be trying to do, saying that market conduct should trump bank act guidelines. The RBC gave a brief statement in response to the complaint saying they respect the bank act and privacy legislation while Flaherty’s office has yet to make any official statement.