H. The Ombudsman for Banking Services and Investments

• 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: 74-78

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Prior to the creation of the FCAC in 2001, customer-complaint processes and organizations existed within the financial services sector, but these were fragmented, industry-sponsored, and had a low public profile. The role assigned to the FCAC by the 2001 legislation was that of monitoring compliance by financial institutions with consumer-oriented banking legislation, but the broader role of resolving disputes between customers and banks over the numerous other aspects of the bank and customer relationship that fall under the common law was unassigned by the financial institutions legislation.

The Bank Act, 1991,³⁹⁷required, for the first time, that Canadian banks provide internal dispute-resolution mechanisms in relation to

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such matters as bank charges for deposit accounts, payment, credit and charge cards, and the disclosure and calculation of the cost of borrowing. By 1994, the banks had implemented internal dispute-resolution procedures, but continuing complaints from small businesses that banks were insensitive to their financing requirements led in October 1994 to a Parliamentary report³⁹⁸proposing that a national ombudsman scheme for dispute resolution be introduced, modelled on the scheme first begun in the United Kingdom in 1986 and followed subsequently by Ireland (1990), Australia (1990), and New Zealand (1992). Customer dissatisfaction with internal bank dispute resolution was appealable under the 1991 Act to OSFI, but OSFI was not really designed to resolve such matters. In 1996, the banking industry established the Canadian Banking Ombudsman Inc. to hear appeals from individual banks’ dispute resolutions in relation to both small business and individual customer disputes.

The Canadian Banking Ombudsman Inc. was a not-for-profit corporation that ran the Office of the Canadian Banking Ombudsman, and its members were the banks that joined the corporation. The member banks funded the corporation and were assessed on the basis of their assets. 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 Office.³⁹⁹

When the MacKay Task Force⁴⁰⁰reported in 1998, it recommended a single ombudsman system for the entire financial services sector, not just for banks, and further recommended that such a system be established by federal legislation and be state supervised.⁴⁰¹

This was in keeping with consumer empowerment as one of the strategic themes of the MacKay Report generally. The 2001 legislation empowered the Minister of Finance to set up a not-for-profit corporation whose purpose was to deal with complaints not resolved by dispute-resolution procedures within individual financial institutions.⁴⁰²

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Faced with the prospect of a state-run scheme, banks and other financial institutions such as the...