The Federal Consumer Agency of Canada (FCAC), recently released a report on bank complaint handling procedures (the CHP Report) and a report on the operation of external complaints bodies (the ECB Report).

The reports address the FCAC's findings from reviews of banks' complaint handling procedures (CHPs) and external complaint bodies (ECBs) that were conducted in response to a request from the Minister of Finance following the FCAC's 2018 review of domestic retail sales practices.

CHP Report

The review of CHPs was conducted between November 2018 and June 2019 and focussed on the six largest Canadian banks. It aimed to determine whether the banks had implemented the policies and procedures required to handle complaints in a way that met the standards for effectiveness (whether banks were resolving complaints to most consumers' satisfaction), accessibility (whether consumers knew how and where to make a complaint and were able to do so with relative ease) and timeliness (whether banks resolved consumer complaints within a timeframe defined by the regulators and that the consumer considers reasonable) set out in the Bank Act and FCAC guidance. The CHP Report acknowledges potential limitations, including that it was conducted during a limited time period and that it does not, therefore, reflect improvements that banks may have made to their CHPs since the review was completed.

Steps to Resolve Complaints

The CHP Report states that CHPs generally consist of the following levels:

Level 1: Complaints enter banks' CHPs at the consumer's first point of contact, typically a customer service representative in a branch or call centre.

Level 2: A consumer who is not satisfied with the resolution offered at Level 1 may escalate their complaint to Level 2—typically the bank's client relations function, which specializes in resolving complaints.

Level 3: A consumer who is not satisfied with the outcome at Level 2 may escalate their complaint to the bank's designated senior complaints officer, also known as the "ombudsman or ombuds".

Level 4: If a complaint is not resolved to a consumer's satisfaction through internal bank processes, the consumer can escalate the complaint to the applicable ECB (subject to certain requirements).

The CHP Report concluded that the banks' CHPs were generally effective, accessible and timely for simple complaints that could be resolved at Level 1, but that they were less effective, accessible and timely when it came to more complex complaints that required escalation to higher levels.

A number of specific concerns regarding the effectiveness, accessibility and timeliness of the banks' CHPs were identified in the CHP Report. In terms of effectiveness, the CHP Report found opportunities for improvement regarding, for example, procedures to ensure that complaints are handled objectively, efforts to receive meaningful feedback from consumers, procedures for evaluating resources designated to handle complaints, and employee training programs. In terms of accessibility, the CHP Report found deficiencies regarding aspects such as procedures for bank employees to help consumers escalate complaints or to provide additional assistance to consumers who may have more difficultly escalating their complaint (e.g., seniors or consumers in rural areas). In terms of timeliness, the CHP Report found that there were often unreasonable delays when it came to dealing with complaints that were escalated beyond the first level, which were largely due to inefficiencies in banks' policies and procedures.

ECB Report

As noted above, if a complaint is not resolved to a consumer's satisfaction through internal bank processes, the consumer can escalate the complaint to the applicable ECB. Canadian banks are required to be members of one of two ECBs that are approved by the Minister of Finance - the Ombudsman for Banking Services and Investments (OBSI) or the ADR Chambers Banking Ombuds Office.

The FCAC conducted a review of ECB's operations concurrently with its review of banks' CHPs in order to evaluate the ECBs operations against their market conduct obligations and best practices for external dispute resolution. As part of its review, the FCAC examined the regulatory framework for external dispute resolution in other comparable jurisdictions as well as recommendations and principles for external dispute resolution developed by various international organizations.

The ECB Report made certain criticisms and identified several areas for improvement with respect to ECBs. That being said, the ECB Report was positive regarding OBSI’s practices and procedures and how they meet international best practices.

The ECB Report also discussed broader concerns related to having more than one ECB and related conflict of interest considerations, including that this is not consistent with international standards and can negatively affect consumers' perception of the fairness and impartiality of external dispute resolution.

Next Steps

Both the CHP Report and the ECB Report indicate that the FCAC will use its supervisory tools to address the concerns raised in the reviews.

The CHP Report also highlights the fact that the Financial Consumer Protection Framework legislation adopted in 2018 includes a more robust complaint handling regime and strengthens the FCAC's ability to ensure that "banks invest adequate resources in their complaint handling procedures and make the improvements called for in this report". According to the CHP Report, the FCAC will provide further guidance on its expectations in the coming months.

The ECB Report notes that the FCAC will oversee the first mandatory five-year evaluation of ECBs, which will be conducted by a third party in 2020.

Shortly after the reports were released, the Department of Finance announced that it will launch public consultations in the spring of this year to address the findings of the CHP Report and the ECB Report.

The review conducted by the FCAC on CHPs and ECBs, which led to the publication of the CHP Report and ECB Report, deliver on one of the FCAC's previously announced supervision initiatives for 2019-2020. The other 2019-2020 priorities of the FCAC are to implement the new Financial Consumer Protection Framework, to create a code of conduct to guide banks in their delivery of services to Canada's senior population and to continue implementing the FCAC's new supervision framework.