Department of Finance Consultation on Strengthening Canada’s External Complaint Handling System in Banking 

October 14, 2021

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Department of Finance Consultation on Strengthening Canada’s External Complaint Handling System in Banking 

Letter Summary:

The consultation document follows a review of the complaint handling process in banking and Canada’s external complaint handling bodies (“ECBs”) completed by the Financial Consumer Agency of Canada. It seeks views on the guiding principles and structural considerations for the system going forward. The report identified some concerns regarding the current system, including that the multiple model (with more than one complaint handling body) may undermine consumer trust, add complexity, impact impartiality and complicate regulatory supervision. All banks in Canada must belong to an ECB, which must be approved by the Minister of Finance on the recommendation of the FCAC Commissioner. There are two approved ECBs, the ADR Chambers Banking Ombuds Office (whose parent firm operates on a for-profit basis) and the Ombudsman for Banking Services and Investments. The consultation paper suggests that a strong complaint handling system would empower consumers by ensuring they have the ability to clearly set out their complaint with evidence and help them understand the reasons for the final decision of the ECB. Questions in the consultation relate to the structural consideration of allowing banks to choose their ECB, and also solicits views on the attributes of an effective system, such as an ECB’s profit structure, funding model, functions, complainant assistance, governance structure, and whether recommendations should be binding.

Overview of the Council’s Comments:

The CAC is very interested in the structure and efficacy of the dispute resolution and complaints processes that exist throughout the financial services industry and is supportive of the direction of the Department of Finance Canada’s review of the current external complaint handling system for banks.

The CAC believes that the guiding principles behind the external complaint bodies (“ECB”) system in Canada and the appropriate structure for an ECB should be premised first and foremost on a public interest mandate, such that Canadian financial services consumers can rightfully foster trust and confidence in banks and other providers of financial services. It is important that the broader framework of our financial ecosystem be considered with a focus on ensuring that the resulting ECB system is consumer friendly across financial products and services, and that the government remain open to considering both regulatory action and legislative amendments to achieve such ends. We believe the ECB system demands a non-profit model, a hybrid cost assessment formula that drives positive externalities, and that its decisions must be binding to reinforce financial consumer trust in the system and serve the public interest.

Our main concern with contemplating the appropriate structure for ECBs is that Canadian financial services complaint handling systems are segmented by complex regulatory verticals, despite the consumer experience being overwhelmingly focused on unified brand and service experiences within cross-jurisdictional financial services conglomerates. s identified by this consultation; this overly complex financial consumer journey is exacerbated by how the Bank Act allows multiple ECBs to address banking cases.

The CAC believes the framework for Canada’s external complaint handling system could be re-envisioned to be universal in coverage, set the global standard for efficacy, and be intuitive to navigate for all Canadians, regardless of the financial product or service being offered and without the need for financial or regulatory sophistication. See our complete letter for our complete responses to specific questions.