FAIR Canada has submitted a brief to the Parliamentary Standing Committee on Finance regarding consumer protection and oversight in Relation to Schedule I Banks. FAIR Canada has been following the CBC Go Public investigation of improper sales practices at Canada’s banks, and like many, is concerned with the allegations made by former bank employees. FAIR Canada’s Brief highlights factors that have led to an increasing need for objective advice by Canadians as well as the increasing level of trust placed by Canadians in their financial institutions to help them (in their best interests) meet their financial goals. However, it appears that there are firm-wide practices and compensation structures that prevent Canadians from receiving adequate advice including being sold unnecessary products or unsuitable investments that are not in their best interests.
FAIR Canada makes a number of recommendations including a requirement for a best interest standard that includes acting fairly, honestly, and with a duty of loyalty to the client and avoiding conflicts of interest. A best interest standard would combat the proliferation of harmful products, damaging sales practices and financial incentives not in the client’s interest, would remove structural conflicts of interest (notably embedded commissions) and require banks to adapt their business practices so that employees no longer prioritize sales over the interest of the consumer.
FAIR Canada calls on the government to reconsider its decision allowing multiple external dispute resolution bodies to exist for banking complaints. Government and regulators must reform the process of consumer redress through ombudservices so that consumers obtain resolution of their complaint through a binding decision, if the consumer accepts the recommendation. FAIR Canada recommends that consumers be provided with clear information about the complaint process from the financial institution and that banks not confuse consumers by calling the person responsible for complaints at the institution, a bank “ombudsman”.
Finally FAIR Canada recommends that the powers, resources, and processes of the banking regulator, the Financial Consumer Agency of Canada, be reviewed so that it has the necessary structure, resources, legislative mandates and processes to carry out its mandate successfully, ensure effective compliance and enforcement over those it regulates and ensure adequate consumer protection.