Further to our July 2012 Blakes Bulletin: New Oversight for Banking Complaints, the final Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations (the final Regulations) were published in the Canada Gazette on April 10, 2013. The Financial Consumer Agency of Canada (FCAC) has also published Commissioner's Guidance CG-12 Internal Dispute Resolution (IDR Guidance) and CG-13 Application Guide for External Complaint Bodies (ECB Application Guide). The final Regulations and related amendments to the Bank Act come into force on September 2, 2013. The IDR Guidance and the ECB Application Guide take effect on the same date.
Although the final Regulations apply only to banks and authorized foreign banks, the IDR Guidance sets out the FCAC's expectations for the internal dispute resolution (IDR) policies and procedures for all federally regulated financial institutions (FRFIs), not just banks and authorized foreign banks. Further, as discussed below, these requirements apply to all customer complaints, not just consumer complaints.
The principal purpose of the final Regulations (and related Bank Act amendments), as stated by the Minister of Finance, is to enhance the consumer complaint system and the standards that banks and authorized foreign banks must meet. The new measures establish a process for the approval of external complaints bodies (ECBs) by the Minister on the recommendation of the Commissioner of the FCAC. The final Regulations set out the eligibility requirements for ECBs as well as ongoing operational and administrative obligations with which ECBs must comply in order to maintain their approval. The ECB Application Guide sets out the approval criteria for an ECB as well as the application process and information requirements.
The provisions applicable to ECBs in the final Regulations are similar to those that were set out in the draft regulations, as summarized in our July 2012 bulletin. There are some changes, including some additional obligations imposed on ECBs. Notably, in respect of the annual report that an ECB must submit to the FCAC Commissioner, the draft regulations provided that the report must include a summary of the results of consultations with the ECB's members and persons who have made complaints. The final Regulations do not define the scope of this consultation, as it was thought they might, but they add that the ECB must also include in the annual report:
- in respect of each of its members, the number of complaints the ECB received, the number of complaints that were within its terms of reference, the number of final recommendations that it made and the number of complaints that, in its opinion, were resolved to the satisfaction of the persons who made them; and
- the average length of time taken to deal with complaints.
The draft regulations provided that an ECB must make a final recommendation to the parties involved in a complaint no later than 120 days after the day on which the complaint was received. The final Regulations provide that the final written recommendation of the ECB must be made no later than 120 days after the day on which the information that the ECB requires to deal with the complaint, as set out in its terms of reference, is complete.
Impact on Financial Institutions
The final Regulations impose some new requirements on banks and authorized foreign banks (collectively, banks) and the IDR Guidance sets out the FCAC's expectations for the IDR policies and procedures for all FRFIs, not just banks.
Final Regulations. The final Regulations and Bank Act amendments impose the following new requirements on banks:
- If a person makes a complaint to a bank, the bank must inform the person about the bank's internal complaints procedures that it has adopted in accordance with the Bank Act, and the bank must provide the person with any information that is necessary to enable him or her to meet the requirements of those procedures.
A bank must make the following information available to the public on an annual basis:
- the number of complaints that were dealt with by the officer or employee designated by the bank to deal with complaints who holds the most senior position identified for that purpose in the bank's internal complaints procedures;
- the average length of time taken by that officer or employee to deal with the complaints; and
- the number of complaints that, in the opinion of the bank, were resolved by that officer or employee in accordance with those procedures to the satisfaction of the persons who made the complaints.
The means by which a bank must publicize this information is not prescribed. The IDR Guidance suggests that such information could be included in a bank's annual report or public accountability statement. We note that not all banks are required to publish an annual report or public accountability statement. There is no guidance as to how banks should meet this requirement. One approach would be to follow the requirement set out elsewhere in the final Regulations for disclosing the name of the bank's ECB, that is, to make the required information available at all of its branches and points of service where products or services are offered in Canada, and on every website through which products or services are offered in Canada.
- A bank must be a member of one ECB approved by the Minister under the Bank Act.
- A bank must display and make available to the public at all of its branches and points of service where products or services are offered in Canada, and on every website through which products or services are offered in Canada, copies of a written statement disclosing the name of the ECB of which it is a member and with which it must co-operate and the contact information for that ECB.
- A bank must provide the ECB of which it is a member with all information in its possession or control that relates to a complaint without delay after the ECB notifies the bank that the complaint has been received in respect of it. Banks will have to ensure that their privacy policies allow for the disclosure of personal information in this context.
- A bank must give the FCAC Commissioner and the ECB of which it is a member written notice of a request, or an intention to make a request, to become a member of another ECB at least 90 days before the day on which the bank becomes a member of that other ECB.
In order to consolidate the regulatory framework governing complaints in respect of banks, the final Regulations repeal and replace the Complaint Information (Banks) Regulations and the Complaint Information (Authorized Foreign Banks) Regulations. The prescribed information regarding the FCAC's contact information is now set out in the final Regulations.
IDR Guidance. The IDR Guidance provides that the key principles to be implemented by FRFIs in establishing their IDR policies and procedures are effectiveness, efficiency and accountability. All FRFIs are already required to have complaints procedures, and existing procedures will likely address many of the FCAC's guidelines. However, the FCAC has set out some specific standards that it expects FRFIs to implement. With respect to effectiveness, the FCAC expects FRFIs to demonstrate that:
- there is an organizational commitment – from the working level to the board of directors – to the establishment and maintenance of effective IDR policies;
- adequate resources have been dedicated to the IDR procedure. In particular, that the officer(s) or employee(s) designated to implement complaint handling procedures and to receive and deal with complaints are adequately trained and have the necessary authority to resolve or recommend resolutions to complaints;
- a training program has been implemented to train and familiarize all relevant staff with IDR policies and procedures;
- complaint information is retained in such a way to facilitate analysis of historical information, in order to track compliance issues and/or identify potential compliance risks; and
- procedures are in place to ensure that banks can meet the new annual reporting requirement in the final Regulations, set out above; in particular, the procedures must specify the role which holds the most senior position designated by the bank to deal with complaints (e.g., Bank Ombudsman), and banks must establish clear time-frames and mechanisms for meeting their public reporting requirements.
With respect to efficiency, the FCAC expects FRFIs to deal with and resolve complaints in a timely manner and that consumer complaints will be resolved as soon as possible. Policies and procedures should outline relevant actions and time-frames. FRFIs should provide a consumer with an acknowledgement of receipt of his or her complaint without delay once the complaint reaches the first level in the FRFI's complaint escalation process. Within 90 days or less when possible, FRFIs should provide the consumer with a substantive written response to his or her complaint that includes, at a minimum:
- the FRFI's final decision/offer in response to the complaint, including appropriate details and explanations regarding how the final decision was reached; and
- the consumer's right to escalate the complaint to the ECB of which the FRFI is a member upon receipt of the FRFI's final decision, if the complaint has not been resolved to the consumer's satisfaction through the IDR process, or if the complaint has not been resolved within 90 days following receipt of the complaint at the second level of complaint handling.
FRFIs are expected to inform consumers about their IDR procedures, to keep consumers current about the status of their complaints at specific points during the complaint-handling process and to identify and highlight circumstances in which an extension to the timeline may be warranted. If the FRFI takes longer than 90 days to investigate and respond to a complaint, the FRFI should advise the consumer about his or her rights to escalate the complaint to an ECB.
IDR procedures must be written in language that is clear, simple and not misleading and FRFIs must be able to demonstrate that their IDR procedures are accessible to consumers.
Not limited to "consumer" complaints. Despite numerous references to consumers in the Department of Finance press releases regarding the draft and final Regulations and in the IDR Guidance, the complaints procedures requirements of the Bank Act and other financial institutions statutes are not limited to consumer complaints or complaints relating to non-compliance with consumer provisions.
Like the draft regulations, the final Regulations define a complaint as a complaint made to a bank or ECB by a "person" about a "product or service" that was requested or received by the person from a bank. The term "person" is defined in the Bank Act to include an "entity". Accordingly, the final Regulations apply to complaints made by businesses in respect of commercial products and services, in addition to complaints made by consumers.
The scope of the IDR Guidance states that the guidance:
- is intended to assist FRFIs in developing their IDR policies and procedures to comply with the requirements of the legislation to deal with complaints made by persons having requested or received financial products and services;
- outlines the principles that the FCAC considers essential for the establishment of an effective IDR process to help ensure that consumer disputes are handled in a competent manner by FRFIs.
Regardless of this inconsistency, the requirements in the financial institutions statutes are not limited to consumer complaints. Therefore all FRFIs should take note of the minimum standards outlined in the IDR Guidance, including FRFIs that do not provide products or services to "consumers".
The final Regulations come into force, and the IDR Guidance takes effect, on September 2, 2013. All FRFIs will have to review their complaints policies and procedures ahead of that to ensure that they meet the minimum standards outlined in the IDR Guidance. Banks will also have to ensure that their complaints policies comply with the final Regulations, and that they have mechanisms in place to comply with the new annual reporting requirement – both a system to track and analyze complaints data as required, and a means to publicize the required information.