Canadians Deserve a Financial Ombudsman that Meets International Standards

Banks in Canada should not be allowed to choose and hire their own external dispute resolution (“EDR”) provider. Canadians deserve to have an ombudsman that meets the basic principles of independence and effectiveness, and that is easily accessible for all of their banking and investment-related complaints. Consumers should not be sent to a variety of EDR providers, chosen and compensated by the banks. Canadians are not asking for a new system of bank-hired EDR providers but nonetheless are being forced by some banks to use for-profit EDR providers chosen by those very same banks that the consumers have a complaint about.

Canada needs to live up to the current international standards for consumer redress of banking complaints that are contained in the G20 Final High-level Principles on Financial Consumer Protection which were endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting on October 14-15, 2011. We are disappointed that the federal government appears to underestimate the weaknesses and risks in a system where multiple EDR providers would be allowed to operate on a for-profit basis.

Comparing OBSI to For-Profit EDR Providers Hired by Banks

FAIR Canada has prepared a chart comparing the services offered by OBSI to those provided by for-profit EDR providers. The firm that currently provides the EDR services, ADR Chambers Banking Ombuds Office (“ADRBO”), is hired and paid by the two banks (Royal Bank and TD Bank) that have opted out of OBSI, for banking-related disputes.

The comparison makes it clear that, on the whole, OBSI meets ombudsman-related principles such as those set out by the G20, the Joint Forum of Financial Market Regulators’ Framework, as well as the standards and principles set by the International Ombudsman Association[1]. In our view, the engagement of the two banks with ADRBO does not meet the same level of standards and principles, in particular because it does not meet the key, basic principle of independence (see chart for details).

The World Bank, in its report Fundamentals for a Financial Ombudsman dated January 2012, (the “World Bank Report”) sets out the basic principles for the creation of an independent and effective financial ombudsman. FAIR Canada agrees with the World Bank Report that allowing financial firms to choose between two or more competing ombudsmen is to “…present severe risks to independence and impartiality – because financial businesses may favour the ombudsman they consider likely to give businesses the best deal” and that such “competition” is one-sided because consumers are not given any choice of ombudsman. The World Bank Report states that the title ‘ombudsman’ should only be used for a body that complies with ombudsman principles – including independence and effectiveness. The arrangement with ADRBO does not meet the principles, and in particular the principle of independence, and therefore it should not suggest that it is an ombudsman.

FAIR Canada has recently written to the federal Minister of Finance providing him with our comparison of OBSI to for-profit EDR providers and requesting that he inform the banks that Canada must live up to current international standards for consumer redress and that Canada should therefore have one, national EDR service provider as the sole dispute resolution provider for banks.

We would like to note that the comparison is not meant as a criticism of ADRBO or ADR Chambers, but rather of the overall system or framework under which they must do their work. As stated by OBSI in its April 23, 2012 OBSI Update: “It is not only the end decision that must be beyond reproach, but also the system itself…If the system is flawed from the outset, even the best people cannot prevent the output from being similarly flawed”.


Click HERE for a detailed comparison of OBSI and for-profit EDR providers.


1.  G20 High-Level Principles on Financial Consumer Protection, October 2011. In particular, Principle 9 requires that “Jurisdictions should ensure that consumers have access to adequate complaints handling and redress mechanisms that are accessible, affordable, independent, fair, accountable, timely and efficient….Recourse to an independent redress process should be available to address complaints that are not efficiently resolved via the financial services providers and authorised agents internal dispute resolution mechanisms.” [emphasis added] Available online at http://www.oecd.org/dataoecd/58/26/48892010.pdf. See also the Joint Forum of Financial Market Regulators, “The Financial Services OmbudsNetwork – A Framework for Collaboration”, Guideline No. 1, Independence. Available online at http://www.obsi.ca/images/document/up-2Framework_with_the_Regulators_EN.pdf and the International Ombudsman Association Code of Ethics, ethical principles of Independence, and Neutrality and Impartiality. Available online at http://www.ombudsassociation.org/about-us/code-ethics.

April 30, 2012