Financial institutions that fail to respect the decisions handed down by Canada’s bank ombudsman are about to be singled out for the public to see.
In a distinct shift from how the federal watchdog has conducted itself in the past, the Ombudsman for Banking Services and Investments (OBSI) said it will now start publicizing the identities of firms that refuse to compensate clients after losing a case.
The “name and shame” method is a far more aggressive approach to dealing with the industry than OBSI has taken in the past. However, in a statement published Thursday on its website, OBSI said a proliferation of financial institutions that are flouting rulings against them have made the new approach necessary.
“Since our organization’s inception in 1996, only one firm has ever refused an OBSI recommendation to compensate a client regarding a complaint we investigated,” OBSI said in its statement Thursday.
“Now, after a lengthy process aimed at trying to fairly resolve certain cases, we expect to be announcing several refusals by investment firms in the coming weeks and months.”
In addition to publicizing the name of the offending financial institution, OBSI said it will also make the findings of its investigation into the case public. OBSI handles complaints about banks and investment dealers that can’t be resolved between the consumer and the firm.
“Some have likened it to a nuclear deterrent,” OBSI said. “It is the principal tool that OBSI has to incent firm co-operation, but it was never meant to be used.”
The ombudsman said it tried to resolve the cases in question, but they remain at an impasse. In some instances, “firms simply have not agreed to compensate their customers for the firm’s own mistakes, liabilities and compliance deficiencies,” OBSI said. “Having exhausted all avenues to settle these complaints, OBSI is now preparing to publicize the refusals.”
The need to start naming firms highlights the lack of power Canada’s bank ombudsman has been able to wield over the financial sector in recent years. OBSI was created as a compromise with the sector, after the federal government considered setting up a federal office to oversee banking complaints. Instead, OBSI was set up as an independent mediator funded by the industry.
However, during the past three years Canada’s two largest banks, Royal Bank of Canada and Toronto-Dominion Bank, decided to pull their consumer banking arms out of OBSI because they were unhappy with the process. This eroded OBSI’s clout, as did a move by the federal government to open up the ombudsman job to competing firms, allowing banks to choose who handles their retail banking complaints.
This was criticized by OBSI, which said it would allow banks to shop around for a friendly dispute resolution service if the firms were unhappy with rulings from the ombudsman.
Banks are still required to allow OBSI to handle complaints involving their investment dealers. It is expected that most of the firms singled out under the forthcoming “name and shame” approach will be on the investment side of the financial sector, as opposed to retail banking.
“We remain hopeful that the cases will yet resolve before we announce them as refusals to compensate,” OBSI said in its statement. “Unfortunately the coming period will likely focus significant attention on those cases that could not be resolved.”Report Typo/Error
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