(Toronto) The long wait to shorten the complaint resolution process in the banking sector is almost over, with a series of regulatory updates set to take effect at the end of the month.
Posted at 10:52
The reforms are contained in a new financial consumer protection framework that aims to address loopholes in the system, but despite nearly a decade of preparation, critics say the changes represent more minor tweaks than a fundamental solution to the problems. .
“It’s not a drastic change, it’s not enough to really protect consumers,” argues John Lawford, executive director of the Public Interest Advocacy Centre.
Banks have already started sending out notifications about some of the changes they will need to implement when the rules come into force on June 30, such as alerts when an account balance drops below 100. $ and new rules limiting liability to $50 for lost or stolen credit cards, except in cases of gross negligence.
The new rules also reduce to 56 the number of days after a complaint is first filed against a bank before someone can escalate the issue to one of the third-party assessors. Previously, the rules allowed for a 90-day period following the bank’s second level of resolution, but a lack of transparency from banks about the timeline meant that the actual average time before the issue could be brought to a higher court reached approximately 130 days.
Since the Department of Finance sent out an initial consultation paper on the changes in late 2013, concerns surrounding high-pressure sales tactics and upselling in the industry have also grown. The new rules now specifically state that banks cannot “impose undue pressure” to sell a product or service, and that those products and services must be “appropriate to the person” and their financial needs.
A relationship that remains transactional
But while the new framework forces banks to improve their policies, it’s unclear how enforceable or effective the new rules will be.
“It doesn’t really change the fundamental relationship between banks and their customers, which is always transactional,” said Rene Kimmett, an intern at the Public Interest Advocacy Center.
The rules don’t go so far as to establish a fiduciary duty to act in the client’s best interest as some securities laws do, she notes.
The amendments also do not incorporate financial product design rules that are used in Australia, the United Kingdom and the European Union, which require banks to design products for an appropriate target market and to ask earlier in the development of a product if it is appropriate.
These rules are particularly helpful in protecting consumers who are offered products and services via push notifications, without having the opportunity to ask questions about the product and its suitability for achieving their goals, Ms.me Kimmett.
The Financial Consumer Agency of Canada (FCAC), which is charged with protecting the interests of bank customers, said the new rules should address many of the concerns about sales tactics it has raised. at the end of May in a report made with the collaboration of mystery shoppers. The document noted that around 15% to 20% of mystery shoppers found product recommendations to be inappropriate, for example when offering premium credit cards that were not accompanied by questions about consumer habits or income. In general, mystery shopping results were worse for visible minority and Aboriginal customers.
For its part, the banking industry supports the changes brought about by the new framework, Canadian Bankers Association spokesperson Mathieu Labrèche said in a statement.
“Banks spend a lot of time, effort and resources to ensure that customers receive products and services that are right for them and that they have consented to receive. Banks undertake to respect consumer protection measures. »
Two competitors for complaint handling
Beyond the setting itself, critics like Mme Kimmett also note that while complaint handling time has improved, the problem remains that Canada has two external complaint handling bodies for banks to choose from, which creates a kind of competition between the two organizations, who try to keep the banks as customers while making decisions against them.
The federal government made a campaign promise to establish a single external body to handle complaints and recommitted to it in this year’s federal budget, but has not yet given a timeline for implementing it. change.
The new rules also do nothing to protect consumers from unfair prices, observes Duff Conacher, co-founder of Democracy Watch, a Canadian advocacy organization.
“The rules are not very comprehensive in terms of stopping abuse and discrimination, and do nothing to stop [prix excessifs]. »
According to Mr. Conacher, in addition to better enforcement by the FCAC itself, a much more effective action by the federal government would be to follow through on the Liberals’ election promise to increase the powers of the FCAC to examine the prices charged by banks and impose changes if they are excessive.
“It was promised and it was a huge promise, because it is the first time that a ruling party has promised to give a regulatory agency the power to review prices and impose changes. »
Asked about plans to create the single complaints body and enact enhanced powers, a finance ministry official reiterated the budget commitment without providing further details, and said the government regularly reviews the framework. of the financial sector and the protection of financial consumers.