The Department of Finance Canada released a consultation paper on July 16 relating to the complaint handling process used by consumers for banking services and products. The consultation document follows a review of the process and Canada’s external complaint handling bodies completed by the Financial Consumer Agency of Canada (FCAC), and seeks views on the guiding principles and structural considerations for the system going forward. Currently, banks have a two-part complaint handling process involving an internal complaints process and external compliant handling system which relies on two external complaint bodies (an ECB) for those complaints that are not resolved by the bank’s internal process. The FCAC report, published in February 2020, identified some concerns regarding the current system including that the multiple model (with more than one ECB) 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.

The minimum operating standards for an approved ECB are set out in banking legislation, and they are required to be impartial and independent when dealing with a complaint. 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 by the ECB. The paper sets out that guiding principles for Canada’s complaint handling system includes accessibility, accountability, impartiality, timeliness, and impactful decisions. 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. While the paper relates to the banking sector, other market participants may wish to follow the outcome as it may have an impact on complaint handling processes for registrants in future. Comments on the proposal are being accepted until October 14.

August 31, 2021