Canada: Federal Government Creates A Stronger Bank Consumer Complaints System

The Federal Government has proposed a new regime for the handling of complaints by customers of banks. While banks are already required to have a consumer complaints procedure in place and to be a member of an external complaints body where unresolved complaints can be referred, the current system has not been satisfactory to many of the banks or consumers.

The Current Consumer Complaints System

While the vast majority of consumer complaints against banks are settled based on the internal procedures of each bank, any complain that cannot be so settled has, in the past, been referred to the federally appointed Ombudsman for Banking Services and Investments ("OBSI"). On the bank side, two of Canada's banks made the decision to no longer use the services of OBSI and instead, hired their own dispute resolution service. On the consumer side, the complaint was that there was uncertainty as to the manner in which a complaint would be handled if the internal process failed.

The Proposed System

Under the new proposed system, external complaints bodies will be established to hear consumer complaints. Those external complaints bodies must be first approved by the Minister of Finance. The Financial Consumer Agency of Canada ("FCAC") will administer the approval process for such external complaints bodies, conduct an in-depth review of external complaints bodies prior to consideration for the approval by the Minister of Finance and monitor and enforce compliance with the standard that will be established.

The Government has proposed new regulations to be known as the "External Complaints Bodies Regulations" that will set the standard that external complaints bodies must meet for approval as well as the obligations of Canadian banks to use these entities. The proposed regulations are intended to ensure that external complaints bodies are accessible (consumers will be guaranteed that complaint handling is easily accessible and available at no cost); accountable (the external complaints body is accountable to consumers, banks and the FCAC); independent (consumers will be provided with an independent and impartial hearing for their complaint); transparent (information on external complaints bodies will allow consumers to compare the effectiveness of the external complaints bodies as their information will be made available to the public on their operations, membership and funding); effective (consumers and the resolution of complaints would be the focus for all external bodies as opposed to a broader dispute resolution entity); timely (consumers would see complaints resolved within 120 days as opposed to the current industry standard of 180 days); and cooperative (banks and external complaints bodies would be expected to cooperate so the process works well.

The proposed regulations are subject to a comment period.

Stephen Clarks' practice focuses on financial institutions and corporate finance.

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