Law Times

PAGE 10 TD Bank withdrawal prompts calls for action FOCUS OBSI under fire BY MICHAEL McKIERNAN Law Times over T he federal government is set to get the fi nal word in the dispute the future of Canadian banking complaints after the Ombudsman for Banking Ser- vices and Investments found itself in turmoil due to the departure of the Toronto-Do- minion Bank in October. TD became the second bank to leave OBSI in three years after the Royal Bank of Canada departed in 2008. Now all eyes are on Ottawa as consumer advocates demand that the government deliver OBSI a strengthened mandate in upcoming regulations. On the other hand, TD and its new provider, the ADR Cham- bers Banking Ombuds Offi ce (ADRBO), say the government has an opportunity to establish a new competitive market in ombudsman services. Investment brokerages, in- cluding the investment wings of TD and other major banks, must go through OBSI for complaints in that sphere after and approve external com- plaints bodies for banks. When the regulations do fi nally come down, OBSI CEO Doug Mel- ville says they'll bring some much-needed clarity. "What it falls to now is for the government to lay out what its vision is for the dispute reso- lution structure," he says. "Our concern is that we don't set up a structure that promotes a race to the bottom in terms of the consumer protection frame- work that we've been a part of out there for 15 years." Laura Watts, chairwoman 'Basically, we offer an identi- cal service to OBSI,' says Allan Stitt. the Investment Industry Regu- latory Organization of Canada and the Mutual Fund Dealers Association of Canada made it a requirement for their mem- bers in 2002. But the banks have been participating on a voluntary basis since OBSI's formation in 1996. Bill C-47, passed in Decem- ber 2010, gives the Financial Consumer Agency of Canada the power to set standards for of the consumer and inves- tor advisory council to OBSI, says she was "disappointed and concerned" when she heard the news about TD and believes only one complaints resolution body should get the nod. "It's a step in the wrong direction and it signifi cantly weakens the system. OBSI is something that Canada has done right. Consumers need a single source that is inexpensive and easy to access and that is and appears to be neutral and non-partisan. In other jurisdic- tions with multiple bodies, you see a system that is ineff ective and confusing for consumers. It's a failed model." One of her biggest concerns is that consumers won't have confi dence in a complaints res- olution service paid for directly by the bank. "It looks like you're buying your own judge," says Watts. "Our feeling is that the appear- ance of confl ict is so big that it can't be overcome. Even if it's not actually a confl ict, just the idea undermines the con- fi dence that Canadians would have in the system." But Allan Stitt, president of ADR Chambers, a fi rm that has provided RBC's com- plaints resolution service since it left OBSI in 2008, says that if anything, his organization is more independent from the banks. "OBSI is fully funded by the banks, but we only get a very small percentage of our revenue from the banks. It's just one small line of our business, whereas OBSI is completely dependent on the banks." In any case, Stitt says, the TRUST you're putting your reputation on the line. It's all about trust well placed. evidence from the statistics from RBC contradicts any suggestion that his fi rm would favour the banks. In the last three years, ADRBO has car- ried out about 25 full investi- gations a year into RBC com- plaints compared with roughly eight per year in its last three years with OBSI. He also claims ADRBO recommended compensation to consumers in a higher proportion of cases than OBSI when comparing the same periods. "OBSI does a very good job of dealing with investigat- ing banking complaints and should continue to do a good job," says Stitt. "We actually think it helps both the banks and consumers that we have a healthy competition to provide a better service." TD ombudsman Paul Huy- STACEY STEVENS | DAVID MACDONALD | MICHAEL BENNETT Since 1936 Thomson, Rogers has built a strong, trusting, and collegial relationship with hundreds of lawyers across the province. As a law firm specializing in civil litigation, we have a record of accomplishment second to none. With a group of 30 litigators and a support staff of over 100 people, we have the resources to achieve the best possible result for your client. Moreover, we are exceptionally fair when it comes to referral fees. We welcome the chance to speak or meet with you about any potential referral. We look forward to creating a solid relationship with you that will benefit the clients we serve. YOUR ADVANTAGE, in and out of the courtroom. TF: 1.888.223.0448 T: 416.868.3100 W: www.thomsonrogers.com Untitled-1 1 www.lawtimesnews.com er says he backs OBSI as the single provider of dispute reso- lution services on the invest- ment side because of the sheer volume of fi rms, which totals more than 600. But banking complaints, where there are only a handful of companies in operation, are a diff erent is- sue, he says. "It's not necessary on the banking side. If you have a process whereby these provid- ers can identify and share in- formation on any systemic is- sues and as long as the provider meets the test in the regula- tions, I think you could have a small number of providers." Huyer claims TD pulled out of OBSI because of long-stand- ing concerns over the pace and effi ciency of its process. He says OBSI was taking an average of 120 days to deal with straight- forward complaints, while ADRBO claimed it could do them in 60 days. "We feel they have much 4/28/11 10:29:53 AM better triage upfront that streamlines the complaints. It's good for the customer because they get to hear [the decision] quicker." OBSI disputes TD's fi g- ures and claims it deals with straightforward complaints in less than 60 days on average. "It depends how you defi ne straightforward," Huyer re- sponds. In any case, Melville says the length of time a fi le takes is "very largely due to the level of co-operation we get from the fi rms we work with." He says TD's withdrawal came out of the blue and forced OBSI to scramble to implement a new bylaw that required the bank to cover the organization's restructuring costs in the six days before the move became offi cial. Th e bylaw had been in the works since RBC's sudden departure, a time when OBSI's remaining members had to cover several hundred thou- sand dollars' worth of funding previously allocated to handle RBC complaints. "TD is a sizeable player and that had implications for us from a fi scal standpoint," says Melville. "Th e departing fi rm has obligations and there's an impact on service as a result of the departure." Th e Canadian Foundation for Advancement of Investor Rights waded into the debate last month when Ermanno Pascutto, its executive direc- tor, wrote to Finance Minis- ter Jim Flaherty to accuse the banks of turning on OBSI, an entity they created in an eff ort "to pre-empt the imposition of a statutory ombudservice," for "not being subservient to the industry's interests." "Permitting banks and other member fi rms to opt out and choose their own external dispute resolution provider . . . threatens the existence of OBSI and jeopardizes the fairness and independence enshrined in the current system. It is not in the public interest to permit multiple [external] providers, particularly where the fi nan- cial institutions choose and compensate private, for-profi t providers," he wrote, adding that OBSI's rulings should be binding on the parties. Stitt says talks are ongoing between ADR Chambers and Flaherty's ministry, as well as the Financial Consumer Agen- cy of Canada. He's confi dent the fi rm will be able to meet the standard when the govern- ment publishes the regulations. "Basically, we off er an iden- tical service to OBSI. Th e one small diff erence is our investi- gators are all trained as media- tors, so they're not just inves- tigating the dispute but also trying to see if the parties can work out a mediated solution. We're absolutely confi dent we'll be able to meet the re- quirements." December 5, 2011 • Law Times

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