Consumer watch - Tangerine Bank hits sour note with RRSP and TFSA transfers

Tangerine accepts money readily enough but what if you want it back?

ING Direct pioneered the no-fee savings account in Canada. Unfortunately, the U.S. Financial Crisis morphed into a World Financial Crisis in 2008 -2009 and many European banks found themselves (along with their American counterparts) in deep financial trouble. According to Wikipedia:

In 2008 as part of the late-2000s financial crisis ING Group, together with all other major banks in the Netherlands, took a capital injection from the Dutch Government. This support increased ING's capital ratio above 8%, however as a condition of Dutch state aid, the EU demanded a number of changes to the company structure. This resulted in divestiture of a number of businesses around the world, which included insurance businesses in Latin America, Asia, Canada, Australia and New Zealand and the ING Direct unit in the US, Canada and the UK .”

 On August 29, 2012,The Bank of Nova Scotia bought out ING Direct Canada and renamed it in April 2014 as Tangerine Bank.

Despite the promises of outstanding customer service on their new TV commercials; my client’s recent experiences with the new bank have not been good ones. The issues have been with transfers out. Specifically, registered plans transfers such as RRSPs and TFSAs.

Under the Income Tax Act, financial institutions are obliged to transfer a RRSP to another financial institution upon the bank’s customer written request to do so.

There are voluntary guidelines as to how long this transfer process should take. According to the CBA (Canadian Bankers Act) Guidelines, a registered plan transfer should be done within 7 business days and up to 12 business days during the busy RRSP season. Unfortunately, the guidelines are voluntary and non-binding so in reality a financial institution can exceed any of these limits without fear of regulatory penalty.

A number of very late transfers from Tangerine has resulted in a curious turn of events that appears to show that the bank may be inappropriately applying “privacy concerns” to institution–to–institution transfers resulting in considerable delays and frustration with a transfer process that has ground to a halt. Two clients have already sworn that they will never deal with Tangerine Bank again. Two others have moved their funds out of the new Tangerine Bank to Manulife Bank which offers a premium savings account very similar to Tangerine’s ISA account. One other client has lost money due to Tangerine Bank’s glacially slow transfer process.

Now why would Tangerine’s privacy policy cause delays and frustration with respect to registered plan transfers?

Great question.

My office has processed many thousands of these types of transfers. We have transferred RRSPs, RRIFs, TFSAs, LIRAs, LIFs, pension plans and all manner of registered plans and over the years have dealt with dozens of banks, trust companies and credit unions.

Therefore, we find Tangerine Bank’s refusal to speak with the institution requesting the transfer as exceedingly odd as Tangerine Bank’s very existence depends on the free flow of money coming in from these very same financial institutions.

Concerned calls to front-line staff about the whereabouts of the transfer-out cheque are met with polite refusals to divulge any information citing “privacy concerns” about releasing any information to the institution (or their authorized representative).

We filed a concern of our own to Tangerine supervisory staff who indicated to us that inquiries should not be made by phone but by fax. We tried to use Tangerine’s suggestion but faxes were not responded to. Even when we indicated (via fax) that the matter was urgent and there was clear evidence of a serious service issue, Tangerine still refused to talk to us directly. Despite our instructions to contact us, Tangerine instead would call a rather confused client who would of course not know anything about the technical details of a registered plan transfer.

We escalated the issue further to the bank’s internal ombudsman; however my email correspondence to the ombudsman was intercepted by another Tangerine department.

Despite my argument that Tangerine clients were being hurt and losing money due to Tangerine’s intransigence, Tangerine would not be swayed. Their policy was their policy and it was not going to change. Future queries from our office would still have to be directed to their fax system and we should get a reply within 48 hours.

As one last ditch effort to appeal for some sort of resolution with regards to their privacy policy, I asked Tangerine if they would honour a letter of direction signed by their customer allowing us to make a service account inquiry on their behalf.

To my complete amazement, horror and dismay, Tangerine Bank’s answer was no!

[Editor’s note: My immediate reaction was shock. Is this even legal?]

Our office is considering escalating the issue. My preference is to contact Tangerine’s CEO directly and ask him to review the Bank’s current policy. Other than that, we are literally at wit’s end with respect to Tangerine Bank.

We find the bank’s privacy view to be contradictory. Institution-to-institution registered plan transfers under the Income Tax Act (ITA) consists of a cheque made payable to the receiving institution. When the receiving institution does not receive their cheque in a timely manner, the receiving institution will always call the transferring institution (in this case, Tangerine Bank) with a service inquiry or follow-up. Perhaps the documentation was not in good order, perhaps the client missed a signature, or maybe the cheque got lost in the mail. It could be any number of things. For the sake of our clients, we have to know.

We believe that Tangerine is inappropriately using “privacy concerns” for institution-to-institution transfers that do not involve client privacy issues at all. As the receiving financial institution already has the client’s personal and confidential information, we find Tangerine’s privacy policy to not release any information about the transfer as decidedly odd. More odd is that Tangerine’s customers are being hurt due to the Bank’s reliance on internal policies that is not in the best interest of their customers.

Tangerine may be Canada’s newest bank but already, my clients are saying it is not delivering the award winning service they claim to have.

---