An investor advocacy group says that Canadian banks should not be allowed to hire their own external dispute resolution provider. The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) is calling on the federal government to ensure that Canada meets international standards for dispute resolution.
Amid controversy over the withdrawal of two of the big banks from dispute resolution service, the Ombudsman for Banking Services and Investments (OBSI), FAIR Canada says “Canadians deserve to have an ombudsman that meets the basic principles of independence and effectiveness, and that is easily accessible for all of their banking and investment-related complaints.”
Consumers should not be sent to a variety of dispute resolution providers that are chosen and compensated by the banks, FAIR Canada maintains. “Canadians are not asking for a new system of bank-hired EDR providers but nonetheless are being forced by some banks to use for-profit EDR providers chosen by those very same banks that the consumers have a complaint about,” it says.
Last fall, TD Bank pulled out of OBSI, following Royal Bank, which withdrew in 2008. Both firms are now using ADR Chambers Banking Ombuds Office (ADRBO) instead.
FAIR Canada reports that it has compared the services offered by OBSI and ADRBO, and concludes, “on the whole, OBSI meets ombudsman-related principles such as those set out by the G20, the Joint Forum of Financial Market Regulators’ Framework, as well as the standards and principles set by the International Ombudsman Association. In our view, the engagement of the two banks with ADRBO does not meet the same level of standards and principles, in particular because it does not meet the key, basic principle of independence.”
“We would like to note that the comparison is not meant as a criticism of ADRBO or ADR Chambers, but rather of the overall system or framework under which they must do their work,” it adds.
FAIR Canada notes that it recently wrote to the federal finance minister, Jim Flaherty, providing him with its comparison of OBSI to for-profit EDR providers, and, “requesting that he inform the banks that Canada must live up to current international standards for consumer redress and that Canada should therefore have one, national EDR service provider as the sole dispute resolution provider for banks.”
It says that Canada needs to live up to the current international standards for consumer redress of banking complaints that are contained in the G20 Final High-level Principles on Financial Consumer Protection, which were endorsed by the G20 finance ministers and central bank governors in October 2011. “We are disappointed that the federal government appears to underestimate the weaknesses and risks in a system where multiple EDR providers would be allowed to operate on a for-profit basis,” it says.