Archived - BACKGROUNDER: Approved External Complaints Bodies (Banks and Authorized Foreign Banks) Regulations

Background

An effective and efficient complaint handling system is critical to the strength of Canada's financial system. Canadian consumers and their financial institutions benefit when there is timely and no-cost resolution to disputes when they arise.

Though a dispute resolution framework does exist, proposed regulations released today represent an important step towards strengthening this framework, principally through the articulation of clear criteria for the approval of external complaints bodies.

For example, though banks and authorized foreign banks are already required to have internal procedures in place to deal with consumer complaints, today's proposed regulations spell out high standards that an external complaints body must meet in order to facilitate the resolution of disputes.

By bringing clarity to the requirements external complaints bodies must meet, consumers can expect timely, impartial and transparent resolution of disputes.

Strengthening the Dispute Resolution Framework

A dispute resolution framework already exists in Canada for the banking sector, which specifies:

• The first responsibility for addressing a customer's complaint is with the bank, and banks are required to have dedicated procedures and personnel in place to do so. The vast majority of customer complaints are resolved directly between the bank and customer. The Financial Consumer Agency of Canada (FCAC) will consult shortly on proposed guidelines to clarify expectations for banks' internal complaint handling procedures.

• If customers are not satisfied with the bank's response, the customer may make a complaint to the external complaints body of which the bank is a member. In 2011, for the entire banking sector there were 471 complaints taken in for resolution by external complaints bodies.

In 2010, the Harper Government took steps to strengthen this framework by legislating the requirement that banks and authorized foreign banks be a member of an external complaints body that has been approved by the Minister of Finance. Under these proposed regulations, only external complaints bodies of good character and integrity would be approved.

The FCAC would administer the approval process, conduct an in-depth review of external complaints bodies prior to consideration for approval by the Minister of Finance, and monitor and enforce compliance with these new, high standards. The FCAC will consult shortly on how the application process will work.

The proposed Approved External Complaints Bodies (Banks and Authorized Foreign Banks) Regulations build on this requirement by setting the standard that external complaints bodies must meet for approval as well as the obligations of banks and authorized foreign banks.

The regulatory standards would ensure that external complaints bodies are accessible, accountable, impartial and independent and that they discharge their functions and perform their activities in a transparent, effective, timely and cooperative manner. Building on this, the proposed regulations set specific standards on:

Accessibility – Consumers would be guaranteed that complaint handling is easily accessible and available at no cost.

• Consumers would be provided with services across Canada in both official languages.
• External complaints bodies would be required to accept any bank or authorized foreign bank for membership.
• Banks would be obligated to inform consumers and the public of the name and contact information of their external complaints body.

Accountability – External complaints bodies would be accountable to consumers, banks and the FCAC.

• Once a year external complaints bodies would undertake a consultation with consumers and member banks that have used their services to determine satisfaction with the level of service. These consultations would be publically available.
• There would be regular reporting to the FCAC.

Independence – Consumers would be provided with an independent and impartial hearing for their complaint.

• Every person who acts on the behalf of the external complaints body in connection with a complaint is impartial and independent of the parties to the complaint.

Transparency – Transparent information on external complaints bodies will allow consumers and stakeholders to compare the effectiveness of the external complaints bodies.

• External complaints bodies would make information available to the public on their operations, membership and funding.
• There would be a third-party evaluation, overseen by the Commissioner of the FCAC, every five years with the results publically available.

Effectiveness – Consumers and the resolution of complaints would be the focus for all external complaints bodies.

• Terms of reference for external complaints bodies would be publically available.
• External complaints bodies would concentrate on their role in resolving individual complaints.
• External complaints bodies would notify the FCAC of systemic issues leaving the role of investigation to the FCAC.
• The FCAC would supervise the compliance of external complaints bodies with the proposed regulations.

Timeliness – Consumers would see complaints resolved in a timelier manner than current industry practice.

• Complaints would be resolved within 120 days compared to the current industry standard of 180 days.
• A new standard would be introduced requiring that if a consumer has a complaint that is not covered by the mandate of the external complaints body, the consumer will be notified within 30 days.

Cooperativeness – Banks and external complaints bodies would be expected to cooperate so that the process works well.

• When a member changes external complaints bodies, the proposed regulations would require all files and information be transferred without delay and the consumer be notified immediately of the change.