SCOTIABANK DITCHES NON-PROFIT WATCHDOG
OBSI says situation underscores problem for consumer protection
Bank of Nova Scotia’s announcement this week that it will stop using a not-for-profit watchdog to investigate the most stubborn of customer complaints came after the watchdog prompted concern in the financial industry by proposing changes to the document outlining its purpose and powers that some felt could give it more teeth, public consultation documents show.
The decision by Scotiabank to move on from the Ombudsman for Banking Services and Investments’ oversight will leave OBSI with just two of Canada’s Big Five lenders under its purview for banking — related complaints, underscoring a situation that the watchdog claims is unfair for consumers.
The move comes after OBSI published a proposed update this spring to its terms of reference, which lay out matters such as how the ombudsman is governed, in addition to describing how the organization receives and investigates complaints.
But a few of those changes floated by OBSI set off alarm bells for some in the financial industry.
One comment on the document came from the Investment Industry Association of Canada, which represents 120 investment dealers, including those of the big banks.
Among the reservations voiced by the IIAC in its May 31 submission was an amendment proposed for the definition of “complaint,” which would see it include “issues identified by OBSI in the course of its investigation whether such issues are raised by the Complainant or not.”
The IIAC recommended the phrase “whether such issues are raised by the Complainant or not” should be removed from the document.
“We believe this expands the role of OBSI to becoming an investor advocate rather than an impartial complaint resolution body,” the IIAC said in its public submission.
“It also creates procedural unfairness, as it introduces a new complaint into the process that the firm would not have had an opportunity to deal with internally.”
According to the Bank Act, lenders must have an external ombudsman to handle customer complaints that have not been resolved to the consumer’s satisfaction by the banks’ internal systems. It does not, however, specify which external ombudsman should be used.
A spokesperson for the IIAC noted its members are required to use OBSI as part of their dispute resolution process.
Another submission, made by an executive of a Sun Life Financial Inc. subsidiary, took issue with the word “exclusively ” in a section stating, “All questions of whether a Complaint falls within OBSI’s mandate will be determined exclusively by OBSI.”
“It would appear that this change creates broad discretion,” the Sun Life letter said.
Scotiabank said its move away from OBSI followed a review of the bank’s dispute resolution process, and added that the changeover would take place at the end of its current contract period. The lender will also continue using OBSI for investment-related complaints.
“While this decision was not made lightly, we believe that our customers will benefit from a more streamlined resolution process, including faster response times,” the bank’s statement said.
Asked if Scotiabank’s decision to stop using OBSI for bankingrelated complaints had anything to do with the proposed changes to the group’s terms of reference, a spokesperson for the bank said Wednesday that they had nothing further to add to their initial statement.
OBSI, meanwhile, says it is still reviewing feedback it received on the proposed changes to its guidelines.
Even so, an OBSI spokesperson did say the proposed definition of “complaint” was in line with the group’s “long-standing practice,” which it claims is consistent with what other such bodies do around the world. The spokesperson also noted consumers often have trouble nailing down the facts and issues tied to a complaint.
OBSI “infrequently” uncovers issues that were not previously identified, the spokesperson said, but when it does, it investigates. The firm involved is then given a chance to respond to an issue and may also be given an opportunity to investigate as well.
“If a Participating Firm came across a previously unidentified potential issue in a complainant’s accounts, we assume the Participating Firm would take steps to investigate and, if a problem is found, rectify it,” said OBSI spokesperson Mark Wright in an email. “Similarly, it would not be right for OBSI to identify a potential problem during its investigation and ignore it.”
Scotiabank is now the third of Canada’s Big Five banks to stop using OBSI for banking-related complaints, such as issues around credit cards and mortgages.
RBC and TD opted out in 2008 and 2011, respectively. The two banks chose instead, as Scotiabank is doing, to use ADR Chambers Banking Ombuds Office, a private company.
“We look forward to serving as the external complaints body for the customers of Scotiabank,” said Britt Parsons, banking ombudsman for the ADR Chambers Banking Ombuds Office, in an email. “ADRBO operates independently from the participating banks and is guided by principles of Accessibility, Impartiality, Independence, Integrity, and Accountability. The services of ADRBO are free of charge to those making a complaint.”
Like Scotiabank, however, RBC and TD continue to use OBSI for investment-related issues.
The chief executive of CIBC said Tuesday that he was not planning any changes when it comes to OBSI.
Asked if it was a problem that banks can opt for a different ombudsman, CIBC CEO Victor Dodig told reporters that “the more commonality you have in a system, the better, on some of these factors.”
“I can’t really comment on others’ decisions,” Dodig said. “I know where we are, and we’re fine.”
Bank of Montreal, the other remaining major bank under OBSI’s umbrella, declined to comment.
The head of OBSI said in an interview with the Financial Post this week that the current moment marks “a bit of a tipping point.”
“We’re facing a real problem for consumer protection in the banking sector,” said Sarah Bradley, the ombudsman and chief executive of OBSI.
“By this fall, around 70 per cent of Canadians are not going to have access to a non-profit, publicservice-oriented ombudsman to help if they’ve got a problem with the banks that they can’t solve for themselves.”
Bradley said the current system “creates an inherent conflict of interest, by letting banks choose their own investigator and forcing the dispute resolution services to compete for banks’ businesses.”
“It’s not fair for Canadian consumers and it’s not in their interest,” she said.
CARP, the former Canadian Association for Retired Persons, also called for a single banking ombudsman.
That there is one ombudsman for investment services (OBSI) and two for banking services “makes no sense,” said Wanda Morris, CARP’s chief advocacy and engagement officer, in a release.
Both Bradley and CARP suggested that the federal government needs to take action.
A spokesperson for the Department of Finance Canada said in an email that the federal government “takes the protection of financial consumers very seriously.” Financial Post gzochodne@nationalpost.com Twitter.com/ GeoffZochodne
We believe this expands the role of OBSI to becoming an investor advocate rather than an impartial complaint resolution body.