An investor advocacy group is calling on federal finance minister Jim Flaherty to compel banks to belong to the Ombudsman for Banking Services and Investments, following the second major defection from the dispute resolution service.
The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) has published an open letter it sent to Flaherty, calling on him to designate OBSI as the sole provider of external dispute resolution for financial client complaints, and to make the recommendations of OBSI binding.
The move comes after TD Bank withdrew from OBSI at the end of October. Three years ago, Royal Bank also left the service.
FAIR argues that, “A single dispute resolution service provider is necessary in order to avoid fragmentation, inconsistencies, serious potential conflicts of interest, consumer confusion, and to enable the detection of systemic or widespread issues. It is not in the public interest to permit multiple [external dispute resolution] providers.”
It maintains that OBSI is “an essential, simple, inexpensive service for consumers, even though it is a system in which member firms hold a great deal of power, expertise and knowledge.” And, it says that allowing banks to opt out and use another dispute resolution service “threatens the existence of OBSI and jeopardizes the fairness and independence enshrined in the current system. It is not in the public interest to permit multiple EDR providers, particularly where the financial institutions choose and compensate private, for-profit providers.”
FAIR points out that OBSI was created by the industry to avoid the government imposing a dispute resolution service on it, but it says the industry is now “attacking the entity it created and supported for the level of independence it has achieved and for not being subservient to the industry’s interests.”
Moreover, it says that the financial industry has no real basis for its complaints about OBSI. “The ‘Occupy’ protests reflect a growing distrust of the current financial system and industry’s campaign against OBSI reinforces the negative perception of the financial industry, to which the financial industry should be mindful,” it warns.
“As the Minister responsible for banking and the champion of a national securities regulator, we urge you to act now to prevent industry from retaining multiple providers of EDR services,” it says. “Put OBSI on a stronger footing through permanent legislative authority on a national level. When a national securities regulator comes into being, a single EDR service should also be mandatory.”