Weeks ago the nation’s biggest, dumbest bank pulled a PR boner over a few dozen foreign IT workers. By failing to quickly address the perception it was throwing Canadians overboard to hire cheapo offshore dudes, the bank took a hit. It looked arrogant and uncaring. In the end, CEO Gord Nixon, no less, had to apologize. Millions in advertising goodwill and market share went poof.
Are they doing it again?
On Friday this nasty, iconoclastic blog brought you the latest RBC disaster: a fake editorial piece published by the Toronto Star ‘proving’ homeowners win (with a RBC mortgage) while renters lose. In fact, the numbers were breathtaking. A kid buying a $200,000 mortgage would end up with $420,000 in equity, says the bank, while the kid renter would pay $480,000, and get nothing. Apart from being factually incorrect (RBC assumed no mortgage renewals, fee or tax hikes for 25 years, while guaranteeing a quarter century of higher housing prices), it doesn’t even pass the smell test.
Condo rent in Toronto is now about 50% of condo ownership carrying costs once honest accounting is done. But the bank did everything it could to prove otherwise. Like comparing purchase of a unit in the burbs with renting one downtown, and warning about ‘potential rent increases’ with no provision for higher mortgage rates.
It was more than Raymond could bear. He complained.
I just saw your Toronto Star ad and corresponding blog entry regarding one of your mortgage ads at the Greater Fool comparing rent to buying. As an RBC client and shareholder, I am ashamed of your firm. I hope you bring this to the attention of your supervisors and their supervisors.
This type of misleading advertising is extremely dangerous — it harms a great number of people and is yet, another proof, that ‘big banks’ are evil. You, who are reading this, I hope, will be ashamed of this and do what’s in your power to correct this.
The bank responded, and sent in credit specialist Pierre Arsenault:
I’ve personally reviewed the blog/ad that you have mentioned thoroughly and I do understand how and where you can be getting these negative feelings. After carefully reviewing in-depth the information, we’ve made the advertisement very informative yet clear as to what details and fees have been taken in account. From the best of my knowledge, nothing on the advertisement seems to be falsified to give our new and existing customers the wrong idea and/or a biased opinion.
In all reality, some of the numbers aren’t perfect and they will never be – The entire advertisement is based on a client who will pay a 20% lump sum against their house and who are buying a specific house value with property taxes, insurances, heating, condo fees, etc. Some of these numbers (including interest rates, appreciation of property value, etc.) could be higher and/or lower but the idea is to give our clients a general feel for building equity in a house when you do own one in comparison to not building equity while renting. When we look at the end result, regardless of house value and monthly expenses, buying a house will eventually bring some equity while paying rent to the property owner won’t “build equity” per say, unless you can save on-the-side while paying rent.
I hope this reply to your message has been helpful and informative to you, as we are here to provide you with great financial advice and are definitely looking out for your best interest, as well as everyone else’s.
There you go. The bank stands by the piece. ‘Nothing falsified.’ No ‘biased opinion.’ The point of the ad was to ‘give our clients a general feel for building equity in a house… in comparison to not building equity while renting.”
In order to do that RBC created a faux editorial graphic showing a ‘payoff’ of $420,000 for someone buying a condo versus a $0 gain for the renter. Rent increases were noted, but not mortgage hikes. Rent paid was contrasted only interest payments, no principal. A cheap, bought unit in the burbs was compared to a rented, expensive one downtown. Monthly carrying costs for the renter were purposely overstated while ownership costs were deliberately understated. And nowhere was a word about market risks a buyer might face that a renter would not.
If this were a come-on for Krazy Karl’s Mortgage Madness.com, nobody would notice.
But RBC dominates the industry. It has more than $150 billion in mortgages outstanding. Millions of clients look to it for honest and ethical behaviour, and unbiased advice. Surely our greatest, most systemically-important financial institution has a duty of care to uphold.
I’m sending this to Gord Nixon. Have a nice day, Pierre.