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When Alexis Keach lost her wallet, the Mississauga office manager thought her bank would protect her from unauthorized charges. Thieves stole $1,280 from her chequing account and racked up $1,150 in charges on her Visa card before the Toronto-Dominion Bank froze her accounts.

Although Keach filed a police report, TD initially refused to reimburse her, claiming that she failed to protect her PIN. She flatly denies sharing the number or writing it down, and argues fraudsters routinely crack those four-digit codes. Keach asked TD to reverse its decision and got some money back. But she wonders what recourse she'll have if the bank refuses to refund the whole amount.

The answer? Not much. You might be surprised to learn there is no national consumer protection agency to resolve complaints against banks and other financial institutions. There is only an official-sounding entity called the Ombudsman for Banking Services and Investments. But OBSI is not a regulator—far from it.

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The agency is an industry-funded dispute resolution service, and it's hard to conceive of one with less teeth. Not only are the banks free to ignore OBSI's decisions—they aren't even required to join. That's tough luck for Keach in particular, because TD, along with Royal Bank, have both opted out of OBSI altogether.

So why does such a feeble banking ombudsman even exist? It was a concept cooked up by the banks themselves in 1996 to dissuade the Chrétien government from creating a federal body to tackle consumer complaints. In 2002, OBSI's mandate was expanded to include investment dealers.

In theory, OBSI's complaint process sounds promising. The service is free for consumers, and OBSI will review a case if a customer contacts them within 180 days of being turned down by a member bank. The agency says it will provide a written decision within 90 days or explain why there will be a delay. Complaints can be submitted online, mailed or faxed. Last year, the leading subjects of complaints were mortgages, fraud and bank errors.

But few consumers use OBSI, and those who do are often disappointed. The agency sides with customers in less than a quarter of cases. Securities regulators require OBSI to undergo an independent review every five years, and last year's analysis, led by Deborah Battell, a former New Zealand banking ombudsman, highlighted several fundamental flaws.

First, unlike financial sector ombudsmen in other countries, OBSI's decisions aren't binding. Compensation is also a problem. The organization can recommend awards of up to $350,000, but it can't force banks to pay. The firms can choose to pay less. In 2015, among consumers OBSI deemed worthy of compensation, 18% received less than the agency recommended—an average of $41,927 less.

"The real mischief, however, is not that some consumers receive less, but that OBSI's current mandate allows this to happen. It, in effect, tilts the playing field in favour of firms," the report said.

Worse, even if OBSI decides in favour of a customer, a bank can simply ignore its decision. The agency names and shames such institutions on its website, but the fallout is minimal because most Canadians have never heard of OBSI.

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Even such a limp overseer proved to be too much for RBC, which pulled out of OBSI in 2008, and TD, which left in 2011 (although their brokerage arms remain). They were irritated with costs and delays. But they also disagreed with many of OBSI's decisions. The year TD pulled out, it had received the most complaints. Instead, RBC and TD hired a private dispute-resolution firm called ADR Chambers to tackle retail customer complaints.

Ottawa needs to give OBSI a lot more teeth, and this is an opportune time to do it. The Liberals are currently conducting the biggest review of the Bank Act in 20 years.

All banks should be required to join OBSI, and its decisions should be binding. The $350,000 cap on compensation also has to go. It is entirely possible that consumers could be owed more than that, and they should also be compensated for any interest and aggravation.

As things stand, there's no mention of OBSI in the initial Bank Act consultation documents at all. This has to change. The number of complaints is rising and consumers deserve proper representation—not bureaucratic window dressing that is neither fair nor effective.

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