The federal Finance Department Wednesday published final rules that set standards for the external dispute resolution services that banks use to resolve client complaints.
Last year, the federal government declined to designate the Ombudsman for Banking Services and Investments (OBSI) as the sole provider of dispute resolution services to the banks. Two of the big banks have withdrawn from OBSI in recent years, and hired other firms to rule on their client complaints.
Instead, the government proposed rules requiring banks to belong to a federally approved external complaints body, setting minimum standards for those organizations, and giving the responsibility of monitoring and enforcing compliance with those standards to the Financial Consumer Agency of Canada (FCAC).
Ottawa sets new oversight on consumer banking complaints
The regulations published Wednesday finalize explicit requirements that external complaints bodies must meet, including standards for independence, timeliness and transparency.
“These new rules create a stronger, more independent consumer complaint system, by setting high, pro-consumer standards that all banks and authorized foreign banks must meet,” said Finance minister, Jim Flaherty. “This new oversight, in tandem with additional compliance monitoring of the complaint system by FCAC, brings needed transparency and rigour to the complaint-handling process, so Canadians can expect faster, more effective recourse when issues arise—for example, an issue with a mortgage—and at no cost to them.”
The rules also require complaints services to help clients navigate the complaint-handling process. “External complaints bodies will be fully expected to help consumers throughout the independent complaints process,” added Flaherty.
The regulations also require that both the external complaints bodies and the banks publicly report information about the complaints they receive and investigate on an annual basis.
Finance notes that a company or non-profit that wishes to serve as an authorized external complaints body will be required to submit an application to the Commissioner of FCAC demonstrating that it meets the standards set in the regulations. Once it is assessed, the commissioner will refer the application to the minister, along with a recommendation.
Those applications are due by Sept. 2, which is when the regulations come into force. In the meantime, the FCAC has issued an application guide to assist potential applicants.
The FCAC has also finalized the Commissioner’s Guidance—Internal Dispute Resolution, which outlines the principles the FCAC considers essential for the establishment of an effective, efficient and accountable internal dispute resolution process.
“Banks should work to resolve customer complaints internally, whenever possible,” said Ursula Menke, FCAC commissioner. “When a customer is able to resolve an issue with their bank, it promotes confidence in the financial system, while giving the institution itself better insight into its own compliance with applicable Acts, voluntary codes and public commitments.”
In the meantime, securities regulators are currently considering rule proposals that would require all firms under their jurisdiction to belong to OBSI.