The Public Interest Advocacy Centre is sharply critical of the federal government’s decision not to require banks to use the Ombudsman for Banking Services and Investments to resolve customer disputes.
It was reported Monday that federal finance minister Jim Flaherty said that Ottawa won’t require banks to use OBSI, and that the federal goverment plans to issue rules allowing multiple consumer banking arbitration services. Two of the big five banks, TD Bank and Royal Bank, have already pulled out of OBSI, sparking a call from consumer advocates for the government to make OBSI mandatory.
On Tuesday, PIAC expressed dismay with the government’s approach. “The minister knows regulations can’t fix this. He had to pick between consumers and banks. He chose the banks,” said John Lawford, counsel for PIAC, in a statement.
“The minister has betrayed financial consumers by giving in to the bullying of banks to kill an effective, fair and independent banking ombudsman,” he added.
PIAC calls this is a “hypocritical decision” because, it notes, Flaherty has signed onto G20 principles on financial consumer protection that call for consumers to have access to, “an independent redress process”; and it says that a recent report from the World Bank said a regime with private arbitrators “presents severe risks to independence and impartiality”.
In response to the news yesterday, OBSI said that it would wait to see the rules from Finance before deciding the future of its role in dealing with banking customer complaints.