Since our last newsletter on OBSI, FAIR Canada has written an open letter to Minister Flaherty, Canada's Minister of Finance, in support of OBSI as the single external dispute resolution (EDR) provider for complaints arising from the banking sector. We pointed out that one single EDR provider is necessary in order to avoid fragmentation, inconsistencies, serious potential conflicts of interest, consumer confusion, and to enable the detection of systemic or widespread issues.
As stated by OBSI's Board, OBSI cannot survive without either: a) the voluntary support of the banking sector, or b) mandatory participation through designation by regulators or legislation. TD Bank's recent withdrawal from participating in OBSI's services for its banking clients, which followed RBC's withdrawal on the banking side in 2008, has threatened OBSI's survival. The use of for-profit EDR providers poses problems in terms of consumers' perception of a lack of independence and impartiality and will likely increase confusion due to fragmentation. A news release from OBSI's Board, issued in late October, stated:
In the wake of TD Bank's withdrawal from OBSI for banking complaints, the Board of Directors would like to strongly express our complete support of and confidence in OBSI management and staff... How the complaint handling system functions is essential to maintain that trust when the consumer feels he or she has been wronged or treated unfairly. For many individual consumers and small businesses navigating the bureaucratic maze of many large financial institutions can be a daunting prospect and baffling ordeal. When a consumer cannot satisfy his or her complaint with a firm, there must be a fair, impartial and efficient alternative to costly and lengthy legal action...OBSI's Board of Directors believes we should simplify the redress system for consumers, not allow more fragmentation.
Even TD Bank agrees that a reformed OBSI is the answer: Paul Huyer, TD Bank's internal Ombudsman, was quoted in the Financial Post on October 26, 2011 as saying "We agree with the regulators that one single, independent dispute services is preferable and that should be OBSI".
During a speech at the OSC Dialogue 2011, OSC Chair Howard Wetston, on behalf of the CSA, publically endorsed a single system of EDR, although he did not mention OBSI specifically: "The CSA strongly supports the existence of a single system of informal dispute-resolution to which investors can have recourse as an alternative to litigation or binding arbitration. From our perspective, a principal benefit of such a system is that it permits quicker resolution of complaints in a cost-effective manner. It also contributes to investor protection and confidence in the regulatory system."
The CSA, IIROC and the MFDA have acknowledged that they are carefully reviewing an expert's recent independent review of OBSI, which found that OBSI compares favourably with international EDR services. These regulators wrote a letter to OBSI stating that they were reviewing the report with a view to "ensuring a sustainable system of independent dispute resolution to which investors can have recourse as an alternative to litigation or binding arbitration." They also stated that they intend to work with OBSI to improve and enhance the current system to ensure that investors have the best complaint handling system available.
As stated by OBSI's Advisory Council, "[i]t is the consumer who loses when OBSI does not have the power and resources it needs to work effectively." FAIR Canada believes it is incumbent on government and regulators responsible for the banking and investment industries to ensure that Canadian consumers are protected through a single, EDR provider, namely a reformed and strengthened OBSI.
See below for recent media articles on OBSI:
Globe and Mail - Time for Canadians to stand up for investment ombudsman (Rob Carrick)
Financial Post - Big banks for the little guys (Barry Critchley)
Financial Post - Canada's financial consumers left out in the cold (Theresa Tedesco)