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The FCAC – a finger in the dam?

By Reg Rocha

As I wrote previously, the Financial Consumer Agency of Canada (FCAC) was established in 2001 by Financial Consumer Agency of Canada Act to: “ensure that financial institutions, external complaints bodies and payment card network operators are supervised by an agency of the Government of Canada so as to contribute to the protection of consumers of financial products and services and the public, including by strengthening the financial literacy of Canadians.”

This legislation followed the publication of a Government of Canada Task Force report on the Future of the Canadian Financial Services Sector, which concluded, “the current framework for consumer protection is not as effective as it should be in reducing the information and power imbalance between institutions and consumers.”

In 2001, one of the FCAC’s first actions was to establish a website and a call centre for consumers to make complaints and ask questions about their rights and responsibilities regarding financial products and services. Nearly 20 years later, the Agency undertook a major study of the banking industry’s complaints handling processes and found banks invest very little time, resources or care in handling all but the most basic of their customers complaints. The Report, entitled Industry Review: Bank Complaint Handling Procedures found the complaints processes across the industry appeared largely designed to ensure a consumer would give up before ever getting heard let alone any resolution.

In summary:

• Examining effectiveness, accessibility, and timeliness, the FCAC reviewed the complaint handling procedures (CHP) of Canada’s six largest banks – Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and The Toronto-Dominion Bank.
• More than 5 million consumers file at least one complaint with a bank every year.
• FCAC found that 76% of complaints were resolved at the first point of contact – the branch level. These are generally the easy-to-resolve complaints.
As consumer complaints became more complex, and or challenging, requiring advancement to higher levels of decision-making and authority – 90% of consumers did not escalate their complaint, suggesting the escalation process is not straightforward or easy for consumers.

Annually, 1.2 million banking consumer complaints are abandon because the process was experienced as unclear, too hard, too much work or too much time.

When asked what barriers they faced in attempting to resolve their complaints, consumers offered effectiveness issues including poor customer service, bank staff being unhelpful, rude, or unknowledgeable, lack of communication, and not being able to fix the problem due to lack of responsibility or bank policies; or accessibility-related problems included being transferred to multiple people, inconvenient bank location or hours, phone system issues, and not knowing what to do. Again, while simple branch-level complaints were found to be handled well, the Banks demonstrated a clear lack in the policies and procedures necessary to ensure that escalated complaints were handled consistently and effectively.

For example:

• The Banks were not adequately monitoring, assessing or improving their CHP.
• The Banks’ training programs were largely informal, with the banks being unable to demonstrate that employees who handle complaints understand or follow the procedures.
• The review also suggested that the Banks’ focus on sales goals and targets inhibits their employees’ ability to resolve consumer complaints effectively.

Perhaps the most concerning finding? The type of treatment you can expect from the Banks upon filing a complaint sometimes depends more on who the consumer is to the bank and less on the harm the bank error caused them”.

In 2020, Canada’s Big 6 Banks reported profits totaling $41.13 billion, just $5.1 billion (12%) less than in 2019 (BMO – $5.1B; CIBC – $3.8B ; National – $2.08; RBC – $11.4B; Scotiabank – $6.85B; TD – $11.9B).The Big 6 had record profits of more than $46 billion in 2019 – the 10th year in a row, and more than double their 2010 profits. The banks’ CEOs earned about $12.5 million each in 2019 in salary and bonuses (55% higher than in 2008). Combined, their salaries alone total $75 million.

For their part, the government and the FCAC have committed to addressing the deficiencies observed in this review. Parliament, likely anticipating the FCAC review outcome, had already lent their support by further amending legislation (2018) to give the FCAC more authority and weight. In the 2019 Budget, the Feds also announced a new body: Financial Consumer Agency of Canada Governance Council, which was launched last year as the “renewed Consumer Protection Advisory Committee”. They continue to increase the FCAC’s budget. It now sits at $45.9 million.

All told though, “power imbalance between institutions and consumers” appears to persist and the FCAC has a very big hill to climb.

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