The aim is to create a “more equitable system for handling external complaints in the field of banking services”.
This promise would end the current model which requires banks to use an external qualified complaints body (OETP), but allows them to choose between the Ombudsman for Banking Services and Investments (OBSI) and the ADR Chambers Banking Ombuds office (ADRBO).
This approach has been criticized by consumer advocates, who have argued that the multiple OETP model is unfair to consumers.
These concerns were validated in an FCAC study published in 2020, which found several shortcomings in the existing system, including that it does not comply with international standards and that the multiple OETP model adds complexity. complexity and inefficiency for consumers.
This review also raised concerns about “how allowing banks to choose the OETP negatively affects consumers’ perceptions of the fairness and fairness of the system”.
Finally, he wondered whether allowing competition in the handling of complaints was beneficial to consumers.
While OBSI originally handled all banking complaints, most major banks have since turned to ADRBO, including Scotiabank, National Bank of Canada, Royal Bank of Canada and TD Bank. Of the Big Six banks, only Bank of Montreal and CIBC still use OBSI.
Following the FCAC report in 2020, the Prime Minister’s 2021 mandate letter to Canada’s Finance Minister Chrystia Freeland asked her to set up a single, independent ombudsman service for banking complaints. The 2022 federal budget promised to follow through on this commitment.
Tuesday’s budget not only reiterates that promise, it also indicates that FCAC will choose the sole consumer complaints body.
“All Canadian consumers of financial products would benefit from a strengthened external complaints handling system in the banking sector, with additional benefits for low-income households, as they are generally more at risk of having a level of literacy and weaker financial confidence,” the government said in its statement on the impact of the proposed reforms that accompanied the budget.
During the pre-budget consultations, a variety of consumer groups – including FAIR Canada, CanAge, Prosper Canada, Option consommateurs, the Public Interest Advocacy Centre, Kenmar Associates, the Canadian Association of Retired Persons and the Consumer Council of Canada – called on the government to keep its promise to reform complaints handling in the banking sector.
“It has been over a year, and a budget, since the government made this issue a priority, and yet we have seen no action,” the groups said in a joint pre-budget brief.
“It is essential that we replace this failing system with one that allows consumers of financial products to play on a level playing field and that complies with international guidelines and well-accepted standards of good practice in banking mediation services”, read in the document.
The groups argued that addressing the flaws in the current complaints system is more urgent in the current economic climate, characterized by high inflation, rising interest rates and a predictable economic downturn.
“In the midst of these economic challenges, consumers need certainty that they can access a fair and independent ECB that reflects international standards for financial ombudsman services to fairly resolve complaints that the banks themselves do not. are unable to resolve satisfactorily, they said. OBSI is best placed to meet this standard. »
