Law would ban banks’ use of ombudsman as title for staff.

The federal government is proposing to stop Canada’s big banks from using the term “ombudsman” to describe the people and procedures that they employ to deal with complaints.

Under the current rules, banks are required to have their own system for handling those complaints, and all of Canada’s Big Five lenders have a designated “ombudsman” as part of their processes.

But Bill C-86, a sweeping piece of budget-implementation legislation that was tabled on Monday, contains a “framework” for protecting financialservices consumers, as well as a proposal to block the banks from using the ombudsman title.

“An institution shall not use any misleading term with respect to its procedures or designated officers or employees,” the legislation says, “including any term that suggests that the procedures, officers or employees are independent of the institution — such as the term ‘ombudsman’ or any other term with a similar meaning — or any prescribed term.”

The Department of Finance confirmed in an email that the bill, if passed, “would prohibit banks from using misleading terms with respect to their complaints-handling procedures, including terms that suggest that the procedures, officers or employees of the bank are independent.”

This includes “a prohibition” on the use of the term ombudsman, they added.

In a statement, the Canadian Bankers Association said that lenders “recognize the importance of the provisions in Bill C-86 to create a consumer framework for financial services.”

“This is an issue on which we have been working cooperatively with the federal government and we look forward to working through the Parliamentary process to achieve a practical approach to implementing the various elements of the Bill.”

Nevertheless, the question of how the banks resolve customer complaints remains a sensitive subject in Canada.

Under the current rules, lenders must also belong to an external body that deals with complaints that have not been resolved to a customer’s satisfaction by a lender’s internal procedures. In Canada, the two main providers of this function for the banks are the not-for-profit Ombudsman for Banking Services and Investments (OBSI) and ADR Chambers Banking Ombuds Office (ADRBO), a private, for-profit company.

Bill C-86 would not force the two external complaints bodies to change their names. The status quo, though, has met with dissatisfaction from consumer groups, which was reignited after the Bank of Nova Scotia announced in September that it would switch from OBSI to ADRBO for banking-related complaints, joining Royal Bank of Canada, Toronto-Dominion Bank and National Bank of Canada.

OBSI remains the ombudsman for investment-related complaints for all the banks.

CARP (formerly the Canadian Association for Retired Persons), the Consumers Council of Canada and FAIR Canada have already launched a letter-writing campaign to push Ottawa to mandate that there be a “single impartial, non-profit external complaints body — one that is not perceived to favour the banks,” a press release put out on Thursday said.

The same release criticized the federal government for not making the change to a single ombudsman with Bill C-86, saying the legislation “leaves in place a multiple external complaints body system and, therefore, fails to protect Canadian banking customers by denying them access to a non-profit, independent dispute resolution provider.”

However, the federal government says that Bill C-86 will still require the banks to be a member of an approved independent external complaints body.