ARCHIVED — Vol. 147, No. 8 — April 10, 2013

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Registration

SOR/2013-48 March 21, 2013

BANK ACT

Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations

P.C. 2013-307 March 21, 2013

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsections 455(4) (see footnote a), 455.01(3) (see footnote b) and 456(1) (see footnote c), section 459.4 (see footnote d), subsections 573(4) (see footnote e) and 574(1) (see footnote f), section 576.2 (see footnote g) and subsection 978(1) (see footnote h) of the Bank Act (see footnote i), makes the annexed Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations.

COMPLAINTS (BANKS, AUTHORIZED FOREIGN BANKS AND
EXTERNAL COMPLAINTS BODIES) REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

  • “Act”
    « Loi »
  • “Act” means the Bank Act.
  • “complaint”
    « réclamation »
  • “complaint” means a complaint that is made by a person
    • (a) to a bank or an authorized foreign bank about a product or service that was requested or received by the person from the bank or authorized foreign bank; or
    • (b) to an external complaints body about a product or service that was requested or received by the person from a member of that body.
  • “external complaints body”
    « organisme externe de traitement des plaintes »
  • “external complaints body” means an external complaints body that is approved by the Minister under subsection 455.01(1) of the Act.
  • “member”
    « membre »
  • “member” means a bank or an authorized foreign bank whose request for membership is accepted by an external complaints body, permitting the bank or authorized foreign bank to have access to the services of the external complaints body in connection with complaints made to that body.

PART 1

BANKS AND AUTHORIZED FOREIGN BANKS

Contact information for Agency

2. (1) For the purposes of subsections 455(4), 456(1), 573(4) and 574(1) of the Act, the prescribed information on how to contact the Agency is the following:

  • (a) at its office at 427 Laurier Ave. West, 6th Floor, Ottawa, Ontario K1R 1B9; or
  • (b) through its website at www.fcac-acfc.gc.ca.

Manner of providing information

(2) For the purposes of subsections 456(1) and 574(1) of the Act, the prescribed manner for a bank or an authorized foreign bank to provide the information is

  • (a) in a brochure, statement of account or written statement that contains other information that is required to be disclosed under the Act in respect of an arrangement referred to in subsection 452(3) or 570(3) of the Act, a payment, credit or charge card, the cost of borrowing or any other obligation of the bank or authorized foreign bank under a consumer provision; or
  • (b) in a separate document.

Information regarding complaint procedures

3. A bank or an authorized foreign bank must inform a person who makes a complaint to it about the procedures that it has established under paragraph 455(1)(a) or 573(1)(a) of the Act for dealing with complaints and must provide the person with any information that is necessary to enable them to meet the requirements of those procedures.

Information regarding complaints

4. A bank or an authorized foreign bank must make the following information available to the public on an annual basis:

  • (a) the number of complaints that were dealt with by the officer or employee designated by the bank or authorized foreign bank to deal with complaints who holds the most senior position identified for that purpose in the procedures established by the bank or authorized foreign bank;
  • (b) the average length of time taken by that officer or employee to deal with the complaints; and
  • (c) the number of complaints that, in the opinion of the bank or authorized foreign bank, were resolved by that officer or employee in accordance with those procedures to the satisfaction of the persons who made the complaints.

PART 2

EXTERNAL COMPLAINTS BODIES

Purpose

5. The purpose of this Part is to enhance the process for dealing with complaints under the Act by establishing a scheme for external complaints bodies that are accessible, accountable, impartial and independent and that discharge their functions and perform their activities in a transparent, effective, timely and cooperative manner.

Approval — reputation

6. (1) A body corporate that applies for approval under subsection 455.01(1) of the Act must have a reputation for being operated in a manner that is consistent with the standards of good character and integrity.

Policies, procedures and terms of reference

(2) Before it applies for approval, the body corporate must have policies and procedures, and terms of reference to govern its functions and activities as an external complaints body, that would enable it to meet the conditions that are set out in section 7.

Maintaining approval

7. Every body corporate that is approved by the Minister as an external complaints body must, as conditions of maintaining that approval,

  • (a) maintain a reputation for being operated in a manner that is consistent with the standards of good character and integrity;
  • (b) make its services as an external complaints body available across Canada in both official languages and offer those services free of charge to persons who make complaints to it;
  • (c) ensure that every person who acts on its behalf in connection with a complaint is impartial and independent of the parties to the complaint;
  • (d) accept as a member any bank or authorized foreign bank that makes a request to it for membership;
  • (e) if a person has made a complaint to it in respect of a bank or an authorized foreign bank that is a member of another external complaints body, provide the person with the name of that other body and its contact information without delay;
  • (f) if it determines that all or part of a complaint is outside its terms of reference, provide the person who made the complaint with written reasons for that determination within 30 days after the day on which it receives the complaint;
  • (g) transfer a complaint received by it and all related information that is in its possession or control to another external complaints body without delay if a bank or an authorized foreign bank that is a party to the complaint becomes a member of that other body before a final recommendation is made in respect of the complaint;
  • (h) advise the parties to a complaint that is transferred to it by another external complaints body in writing and without delay
    • (i) that a bank or an authorized foreign bank that is a party to the complaint has become a member of the body corporate, and
    • (ii) that the complaint has been transferred to it;
  • (i) advise the Commissioner in writing and without delay if it determines that a complaint raises a systemic issue;
  • (j) inform the parties to a complaint about its terms of reference and procedures for dealing with complaints and, on request, provide them with any further information and assistance necessary to enable them to understand the requirements of those terms of reference and procedures;
  • (k) deal with complaints in a manner that affects only the parties to them;
  • (l) make a final written recommendation to the parties no later than 120 days after the day on which the information that it requires to deal with the complaint, as set out in its terms of reference and procedures, is complete;
  • (m) consult at least once a year with its members, and with persons who have made complaints to it since the previous consultation, with respect to the discharge of its functions and performance of its activities as an external complaints body;
  • (n) submit an annual report to the Commissioner on the discharge of its functions and performance of its activities as an external complaints body, which includes
    • (i) a summary of the results of any consultation with its members and with persons who have made complaints to it,
    • (ii) in respect of each of its members, the number of complaints that it received, the number of complaints that it determined were within its terms of reference, the number of final recommendations that it made and the number of complaints that, in its opinion, were resolved to the satisfaction of the persons who made them, and
    • (iii) the average length of time taken to deal with complaints;
  • (o) make the annual report available to the public without delay after it is submitted to the Commissioner;
  • (p) submit every five years to an evaluation of the discharge of its functions and performance of its activities as an external complaints body that is conducted by a third party in accordance with terms of reference established by the body corporate in consultation with the Commissioner; and
  • (q) make information available to the public about
    • (i) its constitution and governance and the identity of its members,
    • (ii) the terms of reference that govern its functions and activities as an external complaints body,
    • (iii) all sources of funding for its functions and activities as an external complaints body, including the fees charged to each of its members for its services and the method of calculating those fees, and
    • (iv) the results of the most recent five-year evaluation.

Information relating to external complaints body

8. (1) A bank or an authorized foreign bank must display and make available to the public at all of its branches and points of service where products or services are offered in Canada, and on every website through which products or services are offered in Canada, copies of a written statement disclosing the name of the external complaints body of which it is a member and with which it must cooperate and the contact information for that body.

Definition of “point of service”

(2) In this section, “point of service” means a physical location to which the public has access and at which a bank or an authorized foreign bank carries on business with the public and opens or initiates the opening of retail deposit accounts through natural persons in Canada.

Information relating to complaints

9. A bank or an authorized foreign bank must provide the external complaints body of which it is a member with all information in its possession or control that relates to a complaint without delay after the external complaints body notifies it that the complaint has been received in respect of it.

Notice of transfer of membership

10. A bank or an authorized foreign bank must give the Commissioner and the external complaints body of which it is a member written notice of a request, or an intention to make a request, to become a member of another external complaints body at least 90 days before the day on which it becomes a member of that other body.

PART 3

OBLIGATION REGARDING INFORMATION

Language

11. All information that is provided under these Regulations by a body corporate, a bank or an authorized foreign bank must be in language that is clear, simple and not misleading.

REPEALS

12. The Complaint Information (Authorized Foreign Banks) Regulations (see footnote 1) are repealed.

13. The Complaint Information (Banks) Regulations (see footnote 2) are repealed.

COMING INTO FORCE

September 2, 2013

14. These Regulations come into force on September 2, 2013.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue

The Constitution confers on Parliament exclusive jurisdiction in relation to banking and the incorporation of banks. In this regard, the Bank Act constitutes the complete and exclusive regulatory framework applicable to banking products and services offered by banks. Parliament’s intent that all banking activities throughout Canada be governed exclusively by the same federal standards was clarified with the introduction of a preamble to the Bank Act.

Access to an effective and efficient complaint handling system, together with competition, disclosure, limits on practices not beneficial to consumers and the consumer’s right to exercise informed choice, are key pillars of a financial services consumer protection framework.

A vibrant financial services industry is founded on vigorous domestic competition that delivers the best services to consumers and that best suits their individual needs. Disclosure ensures that consumers have the relevant information to make informed decisions. Financial education ensures that Canadians have the knowledge and the tools to act on the information presented. Limits on certain business practices that are not beneficial to consumers complement the consumer protection framework.

An effective and efficient complaint handling system that resolves customer complaints builds consumer confidence in financial institutions and contributes to the strength of the Canadian banking system.

For customers of banks, there is an integrated dispute resolution system in place:

  • The first responsibility for addressing a customer’s complaint is with the bank, and banks are required to have dedicated procedures and personnel in place to do so. The vast majority of customer complaints are resolved directly between the bank and customer.
  • All banks are also members of an external complaints body. If customers are not satisfied with the bank’s response, the customer may make a complaint to the external complaints body of which the bank is a member; typically only limited numbers of complaints are made.

An external complaints body provides a service involving an impartial review of a customer’s complaint, and it is neither a regulator nor an advocate. For customers, an effective and efficient external complaints body can provide a timelier and no-cost alternative to the court system. However, customers and banks continue to have the right to bring their dispute to the court system.

There had been one external complaints body for the banking sector for many years. With the advent of a second external complaints body for the banking sector, stakeholders were concerned that, in a multiple-provider market, there is a need for criteria to be met by all external complaints bodies for the banking sector, as well as a need to establish expectations for banks and authorized foreign banks’ complaint handling processes.

In Budget 2010, the Government recognized the need to formalize, through legislation, the requirement for banks and authorized foreign banks to be a member of an approved external complaints body. The Sustaining Canada’s Economic Recovery Act received Royal Assent in December 2010, and it amended the Bank Act to establish the requirement that banks belong to an external complaints body incorporated either under Part II of the Canada Not-for-Profit Corporations Act or under the Canada Business Corporations Act (whose purpose is dealing with complaints made by customers of banks) that is approved by the Minister of Finance. The amendments also provided authority to set out, in regulations, clear criteria to govern the approval of an external complaints body.

Objectives

The objective of the Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations (the Regulations) is to strengthen the financial consumer protection framework by

  • setting high standards that external complaints bodies must meet to ensure that they are accessible, accountable, impartial and independent, and that they discharge their functions and perform their activities in a transparent, effective, timely and cooperative manner; and
  • ensuring that banks and authorized foreign banks are accountable to their customers and to the public regarding their complaint handling processes.

Description

The Regulations establish criteria for ministerial approval of external complaints bodies, criteria for maintaining that approval and obligations of banks and authorized foreign banks in respect of external complaints bodies and the complaints that they receive and deal with.

The Regulations specify that, to be an approved external complaints body, the applicant must be operated in a manner that is consistent with the standards of good character and integrity and must have policies and procedures, as well as terms of reference that would enable it to meet the requirements for maintaining approval.

With respect to maintaining approval, the Regulations establish conditions for maintaining approval to ensure that an external complaints body is accessible, accountable, impartial, and independent and that it discharges its functions and performs its activities in a transparent, cooperative, effective and timely manner.

For instance, the Regulations require that every person who acts on the external complaints body’s behalf and is dealing with a complaint be impartial and independent at all times.

As well, the Regulations improve upon the timeliness of complaint resolution by requiring that external complaints bodies resolve complaints within 120 days, compared to the current industry standard of 180 days.

Transparency is accomplished by requiring, in the Regulations, that an external complaints body make publicly available its constitution, governance, membership, terms of reference and sources of funding. In addition, each external complaints body must submit to a third-party evaluation every five years with the results publicly available.

Furthermore, an external complaints body must be accessible by accepting any bank or authorized foreign bank for membership, by making its services available in both official languages, by offering those services free of charge to those making complaints and by providing parties to a complaint with the necessary information and assistance to enable them to understand the requirements of the complaint handling process.

The Regulations promote cooperation by establishing that an external complaints body must transfer all information, without delay, if a member bank becomes a member of another external complaints body. The new external complaints body must notify the parties to an active complaint that it is the new external complaints body once a file is transferred.

The Regulations also enhance the transparency and accountability of the complaint handling process by formalizing existing expectations of banks and authorized foreign banks to notify customers of the name and contact information of their external complaints body, provide any information related to an investigation to its external complaints body without delay, as well as notify the Financial Consumer Agency of Canada (FCAC) and its external complaints body of any changes in these arrangements.

Finally, the Regulations simplify the regulatory framework for complaints towards banks and authorized foreign banks by repealing and replacing the Complaint Information (Banks) Regulations and the Complaint Information (Authorized Foreign Banks) Regulations. Consequently, the Regulations require that banks and authorized foreign banks provide customers with the contact information of the FCAC.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to this proposal, as there are no incremental costs on small business.

Consultation

Following publication of the Regulations on July 14, 2012, in Part I of the Canada Gazette, comments were received from a wide range of stakeholders representing financial institutions, consumer groups and ombudservices. These views were taken into consideration in the development of the final Regulations.

Overall, comments supported setting standards and putting in place a government oversight framework for external complaints bodies. Comments recommending fine-tuning of the framework consistent with the objective of setting high standards to protect consumers were addressed through certain clarifications and in some cases more detailed requirements.

In relation to comments to further enhance transparency and accountability, external complaints bodies must, on an annual basis, publicly report specific information about the complaints they receive and address. Banks and authorized foreign banks must also report publicly, on an annual basis, on customer complaints they receive and deal with directly from consumers. This will provide consumers and stakeholders with a fuller understanding of the number and nature of complaints and of the effectiveness of the consumer complaints framework for banking services as a whole.

To address comments relating to improved accessibility, external complaints bodies must provide information about their procedures for dealing with complaints and, on request, provide the parties to the complaint with any further information or assistance necessary to enable them to understand the requirements of the complaint handling process.

Technical amendments were also made to ensure that external complaints bodies clarify in their terms of reference the beginning of the 120-day time limit to resolve a complaint, and require banks and authorized foreign banks to provide any information associated with a specific complaint to the external complaints body without delay.

Some comments have not been reflected in the final version of the Regulations. For instance, some stakeholders wanted to return to a sole provider model. This model has not worked to protect consumers in the banking sector. A combination of high standards set out in these Regulations and effective supervision and oversight of external complaints bodies by the FCAC is the most appropriate model to achieve impartial and independent external dispute resolution for customers of banks and authorized foreign banks.

Rationale

An effective and efficient complaint handling system that resolves customer complaints builds consumer confidence in financial institutions and contributes to the strength of the Canadian banking system. The Regulations strengthen the financial consumer protection framework by ensuring that consumers have access to impartial external complaints bodies that are independent and accessible and resolve complaints in a timely fashion, enhancing the transparency and accountability and improving oversight of the complaint handling process for customers of banking services through effective supervision by the FCAC.

To a great extent the Regulations formalize existing expectations that banks, authorized foreign banks and external complaints bodies meet voluntarily. For instance, banks and authorized foreign banks currently identify to their customers the external complaints body that they cooperate with, as well as provide their external complaints body with any information related to a complaint in a timely fashion. Meanwhile, external complaints bodies currently report on the complaints they receive and investigate on an annual basis. However, the Regulations ensure that this reporting is comparable across external complaints bodies. The Regulations also build upon accepted industry norms by, for example, improving upon the timeliness of complaint resolution by requiring that an external complaints body resolve complaints within 120 days, compared to the current industry standard of 180 days. In addition, amendments to the Bank Act and the Financial Consumer Agency of Canada Act establish the FCAC as an oversight body for external complaints bodies.

Implementation, enforcement and service standards

The financial institutions legislation gives the FCAC, which monitors and investigates compliance issues at an industry-wide level, as well as within individual financial institutions, regulatory oversight. The FCAC focuses on overseeing and promoting compliance with consumer provisions by banks and federally regulated trust and loan companies, life insurance companies, retail associations, property and casualty insurance companies, and external complaints bodies, in accordance with the requirements of various financial institution statutes.

In order to promote compliance among members of the financial services industry, the FCAC has a number of supervisory compliance tools. These include actions such as on-site examinations of federally regulated financial institutions, desk reviews of documentation, compliance agreements, and other more administrative tools such as letters of concern. The FCAC can also initiate relevant enforcement actions (findings of violations, penalties) to address compliance deficiencies.

The FCAC applies these tools in manners appropriate to the compliance issues identified, with a view to achieving the timely correction of issues in the marketplace. This is accomplished by the FCAC assisting financial institutions’ efforts to correct contraventions, while encouraging them to develop appropriate policies and procedures to comply with consumer provisions that apply to them.

As established in the amended Bank Act, a company choosing to apply to serve the banking sector as an external complaints body must submit an application to the Commissioner demonstrating that it meets the high standards in the Regulations.

Once the application contains all the required information in light of the criteria in the Regulations, as per the common practice for all ministerial approvals, the Commissioner will refer it to the Minister of Finance, along with a recommendation, and send a receipt to the applicant certifying the date on which the application was referred to the Minister.

In making this recommendation to the Minister of Finance, the Commissioner will take into account

  • the ability of the applicant to deal with complaints;
  • the reputation of the applicant for being operated in a manner that is consistent with the standards of good character and integrity;
  • the ability of the applicant to be accessible, accountable, impartial and independent and to discharge its functions and perform its activities in a transparent, effective, timely and cooperative manner; and
  • the ability of the applicant to meet the conditions for maintaining approval as set out in the Regulations.

To increase transparency around the application process, the FCAC has developed an Application Guide for External Complaints Bodies (the application guide) that describes the approval process and sets out in greater detail the requirements and expectations set out in the Regulations. The application guide, developed in consultation with stakeholders, can be found at www.fcac-acfc.gc.ca.

The application guide ensures that each application is considered on its own merits, recognizing that each external complaints body may have a different approach to meeting the standards in the Regulations. For example, it specifies

  • the list of information to be submitted with the application for approval;
  • procedures to be followed in making an application; and
  • the criteria to be considered by the applicant in demonstrating that they have the appropriate policies and procedures in place to meet the standards in the Regulations.

In addition, the FCAC has developed, in consultation with stakeholders, the Commissioner’s Guidance on Internal Dispute Resolution to establish minimum standards deemed acceptable for the establishment of an effective, efficient and accountable internal dispute resolution process by a bank or authorized foreign bank. The Guidance can be found at www.fcac-acfc.gc.ca.

The Regulations will come into force on September 2, 2013, at which time applications for approval can be received by the FCAC. This time horizon will allow potential applicants sufficient time to prepare their applications and ensure that their procedures and terms of reference clearly meet the stipulations of the Regulations, while also allowing time for the FCAC to prepare to receive and assess applications.

Contact

Jane Pearse
Director
Financial Institutions Division
Department of Finance
L’Esplanade Laurier, East Tower, 15th Floor
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-1631
Fax: 613-943-1334
Email: finlegis@fin.gc.ca