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Open letter from OBSI relating to FCAC's review of ECB effectiveness

December 14, 2018

December 12, 2018

Via email

Ms. Lucie Tedesco

Financial Consumer Agency of Canada

 

Re: Open Letter on Review of External Complaint Bodies

Dear Commissioner Tedesco:

I am writing to you to share the Ombudsman for Banking Services and Investments’ (OBSI) experience relevant to the upcoming review of external complaints bodies (ECBs) called for in the government’s recent Fall Economic Statement, which states, in part, that “the Financial Consumer Agency of Canada will conduct a review by June 2019 to assess banks’ complaints handling processes and the effectiveness of the external complaints bodies” (the Review).

OBSI welcomes this opportunity to demonstrate the effectiveness of our services and we look forward to working with FCAC towards the successful completion of the Review.

As FCAC is now in the process of planning the Review, we would like to share with you our experience with independent reviews in the context of financial ombudsmanship and the independent review processes that are generally acknowledged best practices for financial services ombudsmen internationally.

Review should apply international standards of financial ombudsmanship

It is our hope and expectation that the Review conducted by FCAC will substantially conform to these generally acknowledged best practices and evaluate Canada’s ECBs by the standards of financial ombudsmanship, rather than, for example, by comparison to the practices of ombudsmen operating in non-financial areas, such as university ombudsmen or municipal ombudsman services.

Ombudsmen for financial services and other regulated industries exist for different purposes and provide different services to the public than municipal or organizational ombudservices, and these differences must be borne in mind when assessing service quality. Though there are many commonalities among all ombudservices, financial services ombudsmen exist as part of the financial consumer protection framework in a way that municipal or other ombudservices do not.

While municipal or organizational ombudsmen are focused on investigating complaints about government and institutional departments and officers and help ensure appropriate accountability of those entities, financial ombudsmen consider disputes that are primarily about money and financial compensation between private consumers and the government-licensed institutions with which they do business. Financial ombudsmen work to provide access to justice for consumers with respect to financial complaints that cannot be effectively dealt with through the court system but that must be fairly dealt with to ensure continuing confidence in the financial services sector.

Financial ombudsmen are also expected to investigate all complaints raised with them, and in Canada do not have the mandate to investigate systemic issues. Financial ombudsmen act impartially as between the firm and the consumer, and not as the consumer’s advocate. Financial ombudsmen are expected to use their own specialized expertise in financial services regulation and practice to guide their investigations, since consumers are rarely able to position their complaints with such expertise. Financial ombudsmen also evaluate outcomes as well as processes affecting consumers. This is all converse to the expectations of government and institutional ombudsmen.

Independent evaluations are common for financial ombudsman services internationally

For financial ombudservices worldwide, independent external reviews are common and are typically conducted every 3-5 years.

OBSI has been subject to 3 such independent reviews (in 2008, 2011 and most recently in 2016). Our external reviews, along with related documentation are all available to the public on our website: https://www.obsi.ca/en/about-us/independent-evaluations.aspx

Review methodology

Typical elements examined and discussed in an independent review of a financial ombudservice include:

  • Engagement with stakeholders, including interviews and/or surveys of users and key stakeholders and groups familiar with the day-to-day operations of the service. This would typically include an open call for and consideration of public submissions from stakeholders, as well as private interviews with stakeholders including industry, regulator and community representatives.
  • An examination of service quality: including casework capability; timeliness; efficiency; explicit performance objectives of staff and senior management; quality assurance measures; continuous improvement programs; a review of the organization’s training materials and procedural guidance for its staff; and a review of complaints against the ombudservice. This assessment should include a review of a representative sample of completed investigation files and a review of the organization’s stakeholder surveys.
  • A review of issues relating to procedural fairness, including systematic controls against bias; the handling of information collection, negotiation and conciliation processes; decision-making criteria; decision quality; review and appeal mechanisms; compliance with settlements and recommendations; and decision-making accountability and transparency.
  • A review of organizational design, including organization structure; knowledge and training frameworks; adequacy and appropriateness of technology and data systems; a review of management and internal communications systems; and an analysis of organizational culture and morale. This assessment typically includes meetings with the organization’s staff to obtain a detailed understanding of the organization’s processes and workings and meetings with the organization’s management to clarify issues and discuss findings.
  • A review of accessibility, including public awareness; the quality of telephone assistance; explanatory materials available to the public; accessibility of correspondence; and assistance provided for vulnerable consumers.
  • A review of jurisdiction issues, including scope of mandate; mandate determinations and the exercise of discretion.
  • Financial issues, including adequacy of resourcing to accomplish organizational objectives, funding and fee setting.
  • A review of organizational governance and independence, including board and executive effectiveness, strategic planning; risk management protocols, and whistleblowing capabilities and protections.

Examples of recent financial ombudsman reviews

Below are links to some recent independent reviews of financial ombudservices from the UK, Australia and New Zealand, which illustrate the methodology described above:

 

I write this letter as an open letter in the spirit of transparency and public accountability, which are among OBSI’s guiding principles. We look forward to working with FCAC on this important project and welcome the opportunity to demonstrate the effectiveness of our services to you and the Canadian public.

Sincerely,

 

 

Sarah P. Bradley

Ombudsman & CEO

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