Employees' claims of sales pressure spark shareholder lawsuit against TD Bank

A TD Bank teller who spoke out about the pressure to sell customers products and services they didn't need says she feels vindicated a class-action lawsuit is now underway, shining a light on those allegedly unethical practices.

"It makes me know that I did the right thing, coming forward," she told Go Public, after learning about the lawsuit. 

She says she and her colleagues were pressured to make unnecessary sales in order to earn revenue for the bank — and to hold onto their jobs. 

The class action was certified by a Quebec judge in April 2019, but TD only submitted its statement of defence earlier this week. The statement strongly denies the allegations of a widespread, unethical sales culture and says the lawsuit should be dismissed. 

The teller was one of three TD employees who contacted Go Public in 2017, alleging relentless pressure to meet sales targets by doing things like signing up customers for credit cards, adding overdraft protection to customers' accounts or moving them into more expensive chequing accounts. 

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"Speaking out felt like it was the only option we had at the time," she said. CBC News is not naming her because she could lose her job.

After the teller and her colleagues spoke out, hundreds of other current and former TD employees contacted Go Public with similar stories. They said they too felt pressured to behave unethically in order to meet sales targets and hold onto their jobs. In some cases, they even admitted to breaking the law to do it. 

TD's statement of defence calls the CBC News stories "vague, unsubstantiated" and "unverifiable." 

The legal action doesn't come from TD customers who may have been upsold or misled. 

Following Go Public's reporting in March 2017, shares in Toronto-Dominion Bank posted their biggest loss since 2009 — plunging more than 5.5 per cent. 

The lawsuit has been filed under the Quebec Securities Act and claims investors purchased TD stock based on "false and misleading statements" from TD Bank. Shareholders say they were not aware of the alleged internal pressure to sell products and services at any cost.

"This class action is not a direct hit on the practice of pressure selling, it's indirect," said Jasminka Kalajdzic, associate professor at University of Windsor's faculty of law and the author of two books about class actions. "Investors are saying they wouldn't have bought the stock if they'd known about the pressure to sell."

'TD was essentially profiting'  

The lead plaintiff works for Turn8 Partners, a Montreal-area portfolio management company. According to court documents, he purchased TD securities for an investment fund. 

The documents say he was unaware of what is described in the originating application as TD's "pressure selling program" and therefore acquired the securities at artificially inflated prices.

"We are arguing that TD said one thing and did another," said Shawn Faguy, a Quebec lawyer who launched the suit and is representing the plaintiffs.

The court documents also show that TD spoke about delivering "a legendary customer experience" while being recognized as "an extraordinary place to work," guided by ethics policies "that meet the highest standards of integrity, professionalism, and ethical behaviour."

But, Faguy says, "at the end of the day, we argue TD was essentially profiting as much as it could off of its clients. And ultimately it created a work environment which put an extreme amount of pressure on its employees."

In its defence, TD argues that those claims are untrue and points to numerous customer service awards the bank has received over many years, including ranking "highest in customer satisfaction among the big five retail banks," in 2015 for the tenth consecutive year, according to the J.D. Power Canadian Retail Banking Customer Satisfaction Study. 

TD further notes that its been repeatedly recognized for its workplace culture, noting that, in 2017, for the eighth consecutive year, it was "recognized as one of Canada's best employers," according to Aon Hewitt, a human resources consulting firm.

'Unethical, illegal and predatory'

The thrust of Faguy's argument is fuelled by several key TD documents included in the court file. 

Of particular note is one released Dec. 3, 2015, which featured the financial performance of its Canadian retail business segment. Faguy says that document should have disclosed that the increase in retail revenue was driven by what he argues was "an unethical, illegal and predatory" employee sales target system.

"This clearly contains a misrepresentation," said Faguy. "We say anyone who would have bought the stock after that period of time bought it with an artificially inflated price because of that misrepresentation." 

Because of that document — released to explain how TD recently performed, its financial condition and future prospects — the class action represents anyone who purchased TD securities between Dec. 3, 2015 and March 9, 2017, the day before TD's stock value plunged. 

It does not, however, cover stock traded on a U.S. exchange, which was part of a U.S. class action, which settled for over $13 million US. 

Systemic problem?

Kalajdzic says the challenge in this class action will be to prove the alleged wrongdoing was widespread.

TD "can't be faulted for whatever individual employees did," she said. "Plaintiffs are going to have to show this was a bank-wide policy of making employees sell products that were not appropriate to customers."

Faguy says that won't be hard.

"It's not like there is one branch in Montreal or one branch in Vancouver or one branch in Toronto where this was going on," he said. "The sales revenue practices seem to be a systemic practice that was set up to try to drive revenue within the company across the country."

In its statement of defence, TD argues it is "inconceivable" any unethical practices were systemic, pointing out that TD had over 81,000 employees engaging in Canadian retail activities at almost 1,200 branches in 2015. 

After the initial Go Public stories, emails flooded in from employees of TD, Royal Bank of Canada, Bank of Montreal, CIBC and Scotiabank, describing pressure to hit sales targets that were monitored weekly, daily and in some cases hourly.

All five banks said in statements to Go Public that they act in the best interest of their clients and that employees are expected to follow codes of conduct.

The reports at the time prompted the banking regulator, the Financial Consumer Agency of Canada (FCAC), to launch a review of sales practices at Canada's big banks.

It found that a sharp focus on sales may be increasing the risk of "mis-selling" to consumers — defined as selling products or services that may be unsuitable, that don't take consumers' needs into "reasonable" account or that involve incomplete or misleading information.

However, the FCAC's review did not find mis-selling to be widespread, which TD points out in its class-action defence.

As for the first TD teller who spoke out, she says she's grateful TD's sales culture, and the alleged harm she says it caused, will be under scrutiny.

"Nothing will ever change," she said, "if acknowledgement of bad behaviour isn't addressed or punished."