Aggressive sales culture rewards bad banking behaviour

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By Leith van Onselen

While Do-Nothing Malcolm has refused to address banking malfeasance, evidence of wrong-doing continues to pile up. The latest example comes via ABC’s 7.30 Report, which aired the above segment last night on the aggressive sales culture within banks that rewards bad behaviour. Below is the transcript:

LEIGH SALES, PRESENTER: Australia’s banking industry thrives on bonuses and commissions paid to staff but hidden from customers.

Tonight bank workers are breaking their silence about an aggressive sales culture they say rewards bad behavior with potentially devastating consequences for consumers.

The big banks have promised to get rid of bonuses that are proven to drive bad outcomes as a part of an industry review of bank staff pay, but consumer groups are skeptical.

As Pat McGrath reports.

PAT MCGRATH, REPORTER: In the fast money world of Australia’s big four banks, there’s never been so much pressure on staff to sell, sell, sell.

HAYLEY JOHNSTON, FORMER CBA WORKER: I cringe when I hear the name Commonwealth Bank.

Working there changed me as a person to become quite bitter, show no empathy, just a horrible person to be around. I didn’t like who I was.

PAT MCGRATH: Hayley Johnston quit in disgust in March, six years after she started her job at a Commonwealth Bank call centre in Newcastle.

HAYLEY JOHNSTON: I thought it was just a basic role in customer service on the phones taking inbound calls.

PAT MCGRATH: But she quickly discovered that her job was all about sales and her pay was tied to how many new accounts, credit cards, loans and insurance products she could push.

HAYLEY JOHNSTON: We had to quickly go through and see what other direct debits they had with other financial institutions to bring over their credit cards and personal loans, to have all their banking under one roof and also when they were ringing up for balances and various inquiries, you know, try and sell them a home loan.

PAT MCGRATH: Hayley says how the bonuses were calculated changed every year but some years she earned an extra $10,000 on her base salary, but to make that money, she was told to target customers she knew shouldn’t be loading up on debt.

HAYLEY JOHNSTON: They would train us in our coaching and our team meetings to, for sales techniques as to what’s coming up, as in, you know, schools going back or Christmas is coming up, what plans do you have for Christmas?

How are you going to afford to buy the groceries and the children’s presents and stuff. Did you know we have this special offer on our credit cards? Have you considered that?

If they were poor, it didn’t matter. As long as they had that pension as an income, that’s it. Let’s go.

PAT MCGRATH: Hayley Johnston has left banking and is now a beauty therapist. She’s speaking out because she wants customers to know how the banks really operate.

HAYLEY JOHNSTON: It was tough doing that to people. It felt wrong, it felt like I was doing the wrong thing, I shouldn’t be doing it.

That I shouldn’t be putting other people in debt when they didn’t need it.

But at the end of the day, you sort of trained yourself to think that you don’t have to see these people again, doesn’t matter what they think.

You’re going to get your bonus and that’s all that was important and I hate that mentality, it’s disgusting.

MATT THISTLETHWAITE, LABOR MP: Your bank has a program that incentivises through remunerations structures for staff to sell those products to customers, don’t they?

IAN NAREV, CHIEF EXECUTIVE OFFICER, COMMONWEALTH BANK: Um, not directly, no.

PAT MCGRATH: The CEOs of Australia’s big four banks defended the use of these sorts of sales tactics at a parliamentary hearing in October.

MATT THISTLETHWAITE: You’ve got a target that they have to reach each week of trying to push one home loan, one wealth-plus credit card, insurance personal loan, how is that in the consumer’s best interest?

ANDREW THORBURN, CEO, NAB: Well, depends on how it’s done. The goal isn’t to be selling, it is to be listening to clients and where we see opportunities to refer them to a specialist.

ERIN TURNER, CHOICE: Right now it’s really hard to know how staff behavior drives poor customer outcomes.

It’s in a black box – banks have hidden all the information about how they pay frontline staff and their KPI’s.

PAT MCGRATH: Consumer rights groups are pushing the banks to come clean on what bonuses they pay their staff and how the bonuses really work.

ERIN TURNER: If the banks pay their frontline staff to sell products, those staff members are going to prioritise in selling products over customer care and banking products, they’re not like Tupperware or blenders, getting a wrong product has deep financial impacts on someone’s life.

PAT MCGRATH: The hard sell isn’t just over the phone. It’s face-to-face as well and as a teller for 28 years, Gabi Ermenegildi was on the frontline.

What portion of customers would you have to try to sell things to?

GABI ERMENEGLIDI, FORMER NAB EMPLOYEE: Every customer. Every customer irrespective of whether you serve that same customer last week and being in a small little local branch, it’s the customers are the same customers – everyday of the week, you get the same customers.

So what are you going to sell them? You can’t sell an 80-year-old lady a home loan.

You know, you can’t sell her a credit card because she won’t be, you know, she won’t qualify for it.

PAT MCGRATH: Gabi Ermenegildi believes she was pushed out of the National Australia Bank in June because her sales figures were falling.

She filed an unfair dismissal claim and the bank has agreed to call it a resignation.

GABI ERMENEGLIDI: You’re looking at all these customers in the queue, you know, you feel sorry for them because they come into the bank to do what they need to do, and then, I mean, I used to just say, “No, I’m not selling nothing, I’m just going to get rid of this queue and make them happy.”

I’m sure if they want something they’ll tell me.

JULIA ANGRISANO, NATIONAL SECRETARY, FINANCE SECTOR UNION: We see and hear from our members everyday that relentless pressure that is placed on them to sell a financial product to a customer who doesn’t need it.

It’s stress, it’s pressure, it’s bullying, it’s that constant fear of going to work because I haven’t met my sales target. It’s that constant kind of naming and shaming where many of the banks use public ways to try and drive those outcomes.

In some banks they have white boards where you’re ranked in terms of your achievement of reaching those sales targets. That drives bad culture.

PAT MCGRATH: The Australian Bankers Association is in the middle of a review of pressure-selling by bank staff, it’s part of a range of self-regulation measures the industry announced in April when it was in the midst of fighting off a push for a royal commission by Labor.

Yet the Bankers Association, the Commonwealth Bank and NAB refused to do an interview with us.

We wanted to ask them about the knock-on effect of this kind of pressure selling, that more and more Australians are loading up on debt they can’t afford.

ERIN TURNER: We need banks to be transparent about this in order to figure out the impact on customers, but I think it’s highly likely that these sales targets are leading to really poor customer outcomes.

For example the really high credit card debt that Australians are holding.

PAT MCGRATH: In statements to 7.30, the Commonwealth Bank and NAB say they support the review of bonuses and commissions.

Hayley Johnston wants the banks to change how they behavior. The first step, she believes, is for them to be more honest with their customers.

HAYLEY JOHNSTON: One of the customers actually turned around to me one day on the phone and said, “Is that the company you want to work for?”

And I think that was the, that was my ah-ha moment or Oprah moment that made me think, “You know what, I don’t.”

If they can’t support their staff and they just want to work on all sales and targets and keeping their shareholders happy, why would I want to work for them?

LEIGH SALES: Pat McGrath reporting.

It’s the same story the world over. One of the findings of the postmortem into financial institutions after the GFC was that the way employees got paid was an important contributing factor to the problems that followed. Rewarding employees with bonuses for short-term performance creates what we economists call moral hazard: during the good times, bank employees get a significant cut of the gains, but during bad times they do not share the losses.

For those interested in this issue, I recommend you listen to Planet Money’s recent podcast entitled The Wells Fargo Hustle, which takes you inside the headquarters of Wells Fargo bank – the third largest bank in the US – where a bunch of young, stressed-out workers were rewarded for doing some very bad things, like secretly opening up around 2 million bank accounts without customer permission.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.