Re: “OBSI releases its revised, consumer-friendly mandate,” by James Langton (IE, December 2008).

Complaint handling in financial services has been a mess in Canada for years and is well documented. In Britain and Australia, for example, the office of ombudsman is established in law.

Canadian retail clients depend on the industry-sponsored Ombudsman for Banking Services and Investments. [But] retail clients have found the systems difficult to navigate, complex, slow and biased.

After a number of reports, and at the urging of regulators, a number of initiatives were undertaken. Over the years, OBSI’s processes and services have gradually improved.

In 2007 the Framework for Co-operation was released. This lays out the dispute resolution system in financial services, and was agreed to by the federal Department of Finance, the Joint Forum, OBSI, Canadian Life and Health Insurance OmbudService and General Insurance OmbudService.

It describes the architecture of dispute resolution and says that the ombudservices are an important part of consumer protection working in the public interest.

The framework lays out standards for the ombudservices, including independence, external review, accessibility, etc.

Among the expectations of the regulators are: systemic issues, tolling agreements, consumer assistance, “generous” interpretation of mandate — in short, a strong ombudsman service that is an integral part of the consumer protection framework in financial services.

Also in the framework are accountability provisions between OBSI and the regulators. Independent reviews are required every three years (OBSI had an independent, external review in 2007). A number of the changes OBSI has recently introduced are a direct result of that constructively critical review.

We should note that there is no formal requirement in legislation for a bank to be a member of an independent dispute resolution service.

The law as written provides an absolute bare minimum approach — banks must have a complaints procedure, but there are no rules about what those procedures need to be; and communications requirements are also minimal.

The federal government never required the banks to join the ombudsman service because there was a deal made in 1996 for banking, and again in 2002, for investments.

In exchange for not setting up a government service, the banks would be members of the external ombudsman service.

There was never a question of [banks] not being part of OBSI, at least not until the Royal Bank of Canada decided that it didn’t want to be subject to the revised OBSI Terms of Reference and the new rules on complaint-handling and systemic issues.

Royal Bank withdrawal [from OBSI] is bad for financial consumers for the following reasons:
> they could be subject to biased decisions and short-changed on restitution due to lack of independence;

> Royal Bank has turned its back on the agreement between the banking industry and government on independent dispute resolution;

> financial consumers face a two-tier system, in which some get the benefit of a truly independent, industry-wide service subject to the regulator’s framework, while Royal Bank customers have to use a private, for-profit firm hired by the bank.

The Royal Bank system is not in the public interest and will cause many difficulties, especially for seniors, unsophisticated clients, retirees and pensioners.

Ken Kivenko

Chairman, Advisory committee

Small Investor Protection Association



A good article on OBSI. It highlights a couple of concerning issues.

One of the primary reasons the Small Investor Protection Associationstopped recommending OBSI when the limitation period was reduced to two years from six years, was the requirement for investors with a complaint to proceed through the industry process first. We knew that many had taken most of two years or even more to proceed through the process.

When it was indicated that OBSI would limit that dead time to 90 days before they would open a file to “stop the clock,” and also investigate systemic issues, we re-considered recommending OBSI again.

However, with the latest wording of its revised mandate and the fact that participants can opt out at will, we do not feel that OBSI is a viable option upon which investors can depend. We firmly believe that government must legislate a revised approach to investor protection that will include an independent (from the industry) mechanism for timely resolution of investor disputes. To leave Canadians who have a dispute [with a financial services firm] at the mercy of a merciless investment industry is neither fair nor acceptable.

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Stan Buell,
President

Small Investor Protection Association