B. The Evolution of ADR in the Banking Sector

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 403-406

Page 403

The 1991 Bank Act required that Canadian banks offer internal dispute resolution procedures for customer complaints about bank charges applicable to deposit accounts, payment, credit or charge cards, or the disclosure and calculation of the cost of borrowing in respect of loans made by a bank.²

The Act provided further recourse to the Office of the Superintendent of Financial Institutions (OSFI) for a customer dissatisfied with the proposed internal resolution, and although it was not really designed to resolve consumer complaints, OSFI continued to serve that appeal function until the establishment of the CBO in 1996. The creation of the CBO in 1996 was a response to public and political pressure, especially from the small business community, which complained that banks were insensitive to their particular financing needs and which proposed in 1994 that one improvement would be a national ombudsman scheme similar to that in the United Kingdom.³

The Canadian Bankers Association proposed, in response, not only a model code of conduct for dealing with small and medium-sized businesses but also a model ADR code for small business complaints,⁴and in 1996 it established the CBO as a nationwide service for both small businesses and individuals.

Page 404

The Office of the CBO was run by a not-for-profit corporation, the Canadian Banking Ombudsman Inc., whose members were all banks that chose to join the corporation. The CBO was funded by member banks assessed on the basis of their assets, and a two-tiered board system was implemented to ensure that the banks were kept at arms length from the day-to-day operations of the CBO.⁵

In 1998, the MacKay Task Force recommended a single ombudsman system for the entire financial services sector, including the insurance sector, and that such a service be established by federal legislation and be state supervised.⁶

The 2001 legislation empowered the Minister of Finance to establish a not-for-profit corporation the purpose of which was to deal with complaints not resolved at the individual financial institution level.⁷

However, this power has not been implemented, because the banks and the insurance companies proposed instead an industry-run model and the government accepted this alternative.⁸

In November 2002, the Centre for Financial Services OmbudsNet-work (CFSON) was established as a national umbrella organization the purpose of which is to direct consumers to industry-specific ombudsman...