Competing Banking Ombudsmen Bad for Financial Consumers

FOR IMMEDIATE RELEASE
OTTAWA – The Public Interest Advocacy Centre (PIAC) today warned that the Finance Minister’s decision to allow competing consumer banking ombudsman services will harm Canadian banking customers. PIAC publicly posted its comments on the Department of Finance’s proposed Approved External Complaints Bodies (Banks and Authorized Foreign Banks) Regulations this week. PIAC opposes the regulations entirely and called upon the Finance Minister to withdraw them and instead require all banks to resolve consumer banking complaints with the Ombudsman for Banking Services and Investments.
PIAC’s comments noted that allowing for-profit entities offer competing banking dispute resolution services would result in services that will be neither independent of the banks hiring the service nor impartial between customers and the services’ real clients, the banks. Banks will have direct negotiating power in concluding agreements with dispute resolution services and can wholly remove business – or threaten to do so – in reaction to any arbitration decision.
“These regulations entrench a perceived and an actual conflict of interest between the banks and their customers,” stated John Lawford, Counsel for PIAC. “Consumers who are in a dispute with their bank cannot afford to play a game where the referee is paid by the other team.”
Full text: PIAC representations concerning the proposed Approved External Complaints Bodies (Banks and Authorized Foreign Banks) Regulations [pdf file: 0.23mb]

Final Betrayal: Finance Minister’s Multiple Banking ADR Decision Harms Consumers

OTTAWA – July 6, 2012 – The Public Interest Advocacy Centre (PIAC) today condemned the Minister of Finance’s publication of draft regulations for “external complaints bodies” under the Bank Act. The new rules are weak and allow multiple consumer banking arbitration services, thereby destroying the Ombudsman for Banking and Investments (OBSI) which had resolved consumer complaints well.
“The regulations require these external complaints providers to have people who are working on complaints be “impartial and independent of the parties” but everyone knows the banks will choose a provider that gives them favourable results,” stated John Lawford, Counsel for PIAC. “It makes no difference that the arbitrator assigned is not a bank employee – the fundamental conflict of interest is there and consumers can expect poor results and less compensation when wronged by their bank.”
PIAC notes that the Financial Consumer Agency of Canada (FCAC) is to provide oversight of the new banking dispute resolution services, but FCAC may only review the services once every five years and it is not clear what authority FCAC possesses to “de-authorize” or otherwise oversee an arbitration service.
“Consumers are often confused by multiple arbitration systems, which have been condemned as inefficient by the World Bank and G20,” continued Lawford. “The regulations require reporting by the new services and PIAC will monitor consumers’ experiences with them with a view to de-authorizing any poor actors.”
For more information, please contact:
John Lawford
Counsel
Public Interest Advocacy Centre
613-562-4002×25
lawford@piac.ca
www.piac.ca

Financial Consumers Betrayed by Finance Minister’s OBSI Decision

OTTAWA May 1, 2012 – The Public Interest Advocacy Centre (PIAC) today condemned the Minister of Finance’s assertion made yesterday that the federal government will not require Canada’s banks to resolve banking customers’ disputes with the Ombudsman for Banking Services and Investments (OBSI). Instead the Minister has stated the government will publish rules allowing multiple consumer banking arbitration services – effectively allowing Canadian banks – to choose their own judge.
“The Minister knows regulations can’t fix this. He had to pick between consumers and banks. He chose the banks,” stated John Lawford, Counsel for PIAC.
PIAC notes that this is also a hypocritical decision because the Minister has signed the G20 Final High-level Principles on Financial Consumer Protection that supported the common principles on financial consumer protection prepared by the Organisation for Economic Co-operation and Development (OECD) and Financial Stability Board (FSB) that require signatories to have “recourse to an independent redress process”.
PIAC notes also that the Royal Bank of Canada and TD Bank already have moved their banking consumer dispute resolution to the ADR Chambers Banking Ombuds Office (ADRBO). A regime with private arbitrators such as ADRBO, according to a recent report of the World Bank, “presents severe risks to independence and impartiality – because financial businesses may favour the ombudsman they consider likely to give businesses the best deal. It overlooks the role of financial ombudsmen as an alternative to the courts and creates one-sided competition – because, unlike the financial businesses, the consumers are not given any choice of ombudsman.”
“The Minister has betrayed financial consumers by giving in to the bullying of banks to kill an effective, fair and independent banking ombudsman,” concluded Lawford.
For more information, please contact:
John Lawford
Counsel
Public Interest Advocacy Centre
613-562-4002×25
lawford@piac.ca
www.piac.ca

Change data breach bill to notify more consumers, New PIAC report

The Public Interest Advocacy Centre (PIAC) today released a report entitled “Data Breaches: Worth Noticing?”. The report examines data breach notification in Canada in the private sector in general and in particular whether the proposed federal data breach notification law (Bill C-12) is adequate to protect Canadian consumers.
“Data breaches affect consumer confidence in the new economy,” said John Lawford, PIAC legal counsel and co-author of the report. “Government must require business to report all data breaches to the Privacy Commissioner of Canada or their provincial privacy commissioner.”
The report recommends that Bill C-12, An Act to amend the Personal Information Protection and Electronic Documents Act, be significantly toughened to require all data breaches be reported promptly to the Federal Privacy Commissioner, who in turn should have the power to order companies to notify individual consumers when there is a real risk of significant harm to them. The report also recommends Bill C-12 be amended to give the Privacy Commissioner of Canada order-making power to enforce the requirements and a fining power for non-compliance.
PIAC’s study is based in part on focus groups of Canadian consumers regarding their attitudes to data breaches.
“Consumers clearly think that they should always be notified when a company has lost their personal information unless the Privacy Commissioner says there’s no real risk of harm to them” said Lawford. “Bill C-12 is too weak to assure them that will happen,” he noted.
PIAC called for other amendments to Bill C-12, including increased audit powers for and a special data breach division at the Office of the Privacy Commissioner of Canada.
The Public Interest Advocacy Centre received funding from Industry Canada’s Contributions Program for Non-profit Consumer and Voluntary Organizations. The views expressed in this report are not necessarily those of Industry Canada or of the Government of Canada.

Data Breaches: Worth Noticing?”
Download File: data_breaches_worth_noticing_publication_version_final_final.pdf [size: 0.92 mb]

Executive Summary
Download File: executive_summary_data_breaches.pdf  [size: 0.11 mb]

Sommaire: Ce rapport examine la notification des atteintes à la protection des données au Canada dans le secteur privé en général et, plus particulièrement, si le projet de loi fédéral sur la notification des atteintes à la protection des données (Projet de loi C‐12, Loi modifiant la Loi sur la protection des renseignements personnels et les documents électroniques) permet de protéger de façon adéquate les consommateurs canadiens.
Download File: sommaire_data_breaches.pdf [size: 0.14 mb]

Appendix 1: Focus groups
Download File: databreachesappendix_1_focus_groups_1.zip [size: 0.17 mb]

Data breaches: Appendix 2: Environics Report
Download File: appendix_2_environics_report_2.pdf [size: 0.32 mb]

 

PIAC Letter to Minister of Finance re: Toronto Dominion’s Withdrawal from the Ombudsman for Banking Services and Investments

Dear Minister Flaherty:
The Public Interest Advocacy Centre (PIAC) is a non-profit organization that provides legal and research services on behalf of consumer interests, and, in particular, vulnerable consumer
interests, concerning the provision of important public services.
PIAC is deeply disappointed and alarmed by TD Bank Group’s (TD) decision this week to withdraw its unresolved banking disputes from the resolution by the Ombudsman for Banking
Services and Investments and instead to use a private alternative dispute resolution provider.[FN1]
Created in 1996, the OBSI acts as a neutral, impartial dispute resolution entity in the entire financial sector (banking and investments) and has recently been reviewed and assessed to be
operating “favourably with international EDR [external dispute resolution] services and we found no substantive basis for the level of local criticism” by the industry.2 More importantly, OBSI
offers Canadians a free, fair and effective way to resolve disputes with their banks and other financial institutions. Without the OBSI, many Canadians would be left without an independent,
effective way to resolve their banking- and investment-related disputes.
Read the full text:

Objection to the proposed incorporation of Rogers Communications Inc. to carry on the business of banking in Canada

Objection to the proposed incorporation of Rogers Communications Inc. to carry on the business of banking in Canada
As per s. 26(1) of the Bank Act, PIAC submits this letter to the Superintendent as an objection to the proposed incorporation of Rogers to carry on the business of banking in Canada.
Full text of the letter:

 

An open letter to the G20 finance ministers and G20 leaders from Consumers International

Dear G20 finance ministers and G20 leaders,
During your meetings in France over the next two weeks, the global financial crisis and economic instability will no doubt be top of your agenda. However, we urge you to remember that weak consumer protection in the form of irresponsible mortgage lending was both a catalyst for this crisis, and is a long-standing concern of ‘ordinary people’ who use financial services every day.
We therefore call on you to improve consumer protection in financial services by strengthening the reports you have requested from the OECD and the Financial Stability Board (FSB), and establishing an international organisation to support consumer protection in financial services. This will benefit consumers in your countries, and set a strong example for protecting consumers worldwide.
Following concerted pressure from the world’s consumer organisations ahead of the last G20 summit, you asked the OECD and FSB to address how consumers of financial services can be better protected. Consumers International welcomed these steps and, together with its national members in many G20 countries, has contributed formally to the draft recommendations. Where the reports meet the high standards needed to protect consumers, we ask you to adopt the recommendations and promote them immediately. However, we are concerned that in important areas the recommendations fall short of what is required.
In particular, we are concerned that the OECD principles do not include any explicit reference to deposit guarantees in the event of bank failures, nor do the reports support the adoption of minimum standards for financial products or address the structural changes that are necessary to promote greater competition in financial services.
We ask that more work is done on these areas, and that the work is done quickly and through a completely open process that allows consumer organisations to fully participate from beginning to end. This should include consumer organisations’ access to national representatives sitting on OECD and FSB committees and groups.
We also ask you to support the establishment of an effective new international organisation to support and champion improved consumer protection in financial services. Given the importance of financial services, it is unacceptable that such an organisation does not already exist. Working with national financial consumer protection agencies, it should have the independence to promote best practice and recommendations from whichever international and national initiative is setting the highest standards, conduct peer reviews and support implementation. If this organisation is to meet the considerable task before it, it must have a strong mandate, political support, sufficient resources and a formal process for input from independent consumer organisations.
We wish you a successful meeting, and look forward to working together to protect consumers’ rights to fair, safe and competitive financial services.
Signed
James A Guest President, Consumers International, and President and CEO, Consumers Union of US Inc, US
Beatriz Garcia Buitrago President Consumidores Argentinos ARGENTINA
Nick Stace Chief Executive, Choice AUSTRALIA
Lisa Gunn Executive Director, IDEC BRAZIL
France Latreille Director, Union des Consommateurs CANADA
John Lawford Counsel, PIAC CANADA
Connie Lau Chief Executive, Hong Kong Consumer Council CHINA
Monique Goyens Director General, BEUC, The European Consumers Organisation EUROPEAN UNION
Alain Bazot President, UFC Que Choisir? FRANCE
Gerd Billen Executive Director, Federation of German Consumer Organisations GERMANY
Shirish Deshpande Chairman, Mumbai Grahak Panchayat INDIA
Pradeep S Mehta CUTS International INDIA
Sudaryatmo, SH Chairman, Yayasan Lembarga Konsumen INDONESIA
Luisa Crisigiovanni Director, Altroconsuomo ITALY
Hisa Anan Secretary General, Consumers Japan JAPAN
Maite Cortes Garcia Lozano Executive Director, Colectivo Ecologista Jalisco MEXICO
Alejandro Calvillo Unna Executive Director, El Poder del Consumidor MEXICO
Dmitriy Yanin Director, Confederation of Consumers Associations of Russia RUSSIA
Dr Nasser Chairman of the Executive Board, President of the consumer Protection Assiciation, SAUDI ARABIA
Thami Bolani Chairman, National Consumer Forum SOUTH AFRICA
Jaiok Kim President, Consumers Korea SOUTH KOREA
Ali Cetin President, Federation of Consumer Organisations TURKEY
Peter Vicary-Smith Chief Executive, Which? UK

PIAC Comments on the OBSI Consultation Paper Suitability and Loss Assessment Process

PIAC has reviewed the suitability and loss calculation methodology of the Ombudsman for Banking Services and investments (OBSI) and we make the following comments from the conviction that the OBSI approach is not only defensible but is a decided benefit to firms and consumers.
Read the full comments:
 

PIAC Comments on the OBSI Consultation Paper Suitability and Loss Assessment Process
Download File: piac_comments_obsi_suitability_loss_assessment_final.pdf [size: 0.1 mb]

Consumers need more comprehensive protection against late payment penalties

(OTTAWA)— The Public Interest Advocacy Centre (PIAC) today released a 53-page report entitled “A Criminal Rate of Interest: Updating Garland for Consumers” that provides legal updates to the interpretation of usury provisions of the Criminal Code since the Supreme Court of Canada ruled in Garland v. Consumers Gas Co. in 1998 that the definition of “interest” is broad and a late payment penalty could be construed as “interest” on an advancement of credit. Most recently, in De Wolf v. Bell ExpressVu the court refused to extend the definition of “interest” to a $25 administrative fee on late accounts set out in Bell ExpressVu’s standard form contract.
PIAC’s report discusses consumer class actions that challenge the lawfulness of charges and fees levied for late payments by telecommunications, utilities and payday lending companies. These class actions argued that the late payment penalties violate the criminal rate of interest.
“Class actions provide consumers with a useful mechanism to dispute charges related to late payments where they might not otherwise be able to access justice individually,” said Janet Lo, PIAC legal counsel and author of the report. “However, consumer class actions have suffered lengthy delays and are limited in being able to provide direct remedies back to affected consumers.”
Even where class actions reach a settlement, the agreements may provide poor remedies for consumers. For example, some settlements against payday lenders provide vouchers for redemption for future payday lending services, which only serve to perpetuate the spiral of consumer debt. PIAC is also concerned with the recent practice of recovering class action costs by increasing utility rates in Ontario, which has been approved for Enbridge in the Consumers Gas Co. case and is pending approval for Toronto Hydro and other municipal utilities in Ontario.
Payday lenders are now exempt from the application of usury provisions in the Criminal Code where provinces regulate payday lenders and the allowable rate of these loans. Provincial regulation has led to disappointing results for consumers. Several provinces have permitted extra fees that translate to extremely high annual interest rates for consumers.
PIAC’s survey of industry practices found that service providers continue to charge interest rates on late payments. Most service providers charge a fee for payments that bounce due to non-sufficient funds and disclose this fee and the amount charged in standard form contracts.
Combining the disappointing in De Wolf v. Bell ExpressVu, provincial regulation on payday lending that has led to higher interest rates than those allowed by the usury provisions in the Criminal Code and the limitations of consumer class actions against late payment practices, it seems that consumers have even less protection from exploitative credit arrangements today.
Click here for the complete report
 

Executive summary in English
Download File: garland_execen.pdf [size: 0.02 mb]

Click here for the French translation of the Executive Summary
PIAC received funding from Industry Canada’s Contributions Program for Non-Profit Consumer and Voluntary Organizations. The views expressed in the report are not necessarily those of Industry Canada or the Government of Canada.
 

Worldwide consumer organisations sign open letter to G20 calling for financial protection for “real people”

Consumers International, which represents 220 consumer organisations in 115 countries including PIAC, urgently wants to see the needs of everyday consumers of financial services pushed to the top of the agenda at this week’s G20 summit. Consumer organisations from 30 countries, including the G20 countries, have signed an open letter pressing the summit attendees to ensure that the worldwide financial crisis is never repeated.
Justin Macmullan, CI’s head of campaigns explains: “Many G20 members have sought to increase financial stability through the development of stress tests, improved independence of credit rating agencies and requirements to increase capital ratios. And yet, as a group, the G20 has done nothing to address consumer financial protection which – as exemplified by US sub-prime mortgages – was a key catalyst for the financial crisis.
“The interconnected nature of global banking means that people around the world will live with the consequences of this for years to come. And yet, each year the global economy creates up to 150 million new consumers of financial services, many of whom are in countries where consumer protection and financial literacy are woefully inadequate.
CI urgently wants to see the establishment of an Experts Group on Consumer Financial Protection which would help to ensure that consumers from both developed and developing nations have access to stable, fair and competitive financial services.
CI members around the world have been lobbying their own governments as well as the South Korean government to make sure that the interests of “real people” are not overlooked for the interests of big business.
Justin Macmullan concluded: “The time has come for the G20 world leaders to make a real commitment to protecting their citizens from abusive financial services industry practices which are not in the best interests of the consumer.
“International co-operation on financial consumer protection has the potential to deliver substantial savings for individual governments. This can be achieved through the co-ordination of research, the development of standards and guidelines, the sharing of best practice and the avoidance of costly crises.”
Background
CI wants the Experts Group on Consumer Financial Protection to create and recommend adoption by national governments of minimum standards relating to:
· Fair contract terms and charges for financial products and services
· Information design and disclosure on financial products
· The governance and functions of national financial consumer protection bodies.
It should also make recommendations for:
· The promotion of effective competition in markets for financial consumer services
· The development of a permanent organisation for international standard setting and co-ordination with regard to financial consumer protection.
The signatories to CI’s open letter are:
Samuel Ochieng, President, Consumers International and Chief Executive, CIN, KENYA
James A Guest, Vice President, Consumers International and President and CEO, Consumers Union of U.S. Inc, U.S
Consumer organisations in G20 countries
Ricardo Nasio, President, PROCONSUMER, ARGENTINA
Beatriz Garcia Buitrago, President, Consumidores Argentinos, ARGENTINA
Nick Stace, Chief Executive, Choice, AUSTRALIA
Lisa Gunn, Executive Co-ordinator, IDEC, BRAZIL
Maria Ines Dolc, Institutional Coordinator, Proteste, BRAZIL
Michel Arnold, Executive Director, Option Consommateurs, CANADA
John Lawford, Counsel, Public Interest Advocacy Centre, CANADA
Connie Lau, Chief Executive, Hong Kong Consumer Council, CHINA
Monique Goyens, Director General, BEUC – The European Consumers Organisation, EUROPEAN UNION
Reine-Claude Mader, President, CLCV, FRANCE
Alain Bazot, President, UFC-QUE Choisir?, FRANCE
Gerd Billen, President, Federation of German Consumer Organisations, GERMANY
Pradeep S Mehta, CUTS International, INDIA
Nirmala Desikan, Trustee, Consumers Association of INDIA
Sudaryatmo, SH, Charirman, Yayasan Lembarga Konsumen, INDONESIA
Luisa Crisigiovanni, Director of Altroconsuomo, ITALY
Maite Cortes Garcia Lozano, Colectivo Ecologista Jalisco, MEXICO
Alejandro Calvillo Unna, Executive Director, El Poder del Consumidor, MEXICO
Petr Shelisch, Chairman of the Consumers Union of RUSSIA
Mr Dmitriy Yanin, Director of the Confederation of Consumer Associations of RUSSIA
Dr. Mohammad A. Al Hamad, Chairman of the Executive Board, President of the Consumer Protection Association, SAUDI ARABIA
Thami Bolani, Chairman, National Consumer Forum, SOUTH AFRICA
Jaiok Kim, President, Consumers Korea, SOUTH KOREA
Ali Cetin, President, Federation of Consumer Organisations, TURKEY
Peter Vicary-Smith, Which? UK
Non-G20 countries invited to attend the summit
John Kapito, Executive Director, Consumers Association of MALAWI
Francisco Sanchez Legran, President, FACUA – Consumers in Action, SPAIN
Jose Maria Mugica Flores, Director General, OCU, SPAIN
Ana Isabel Ceballo Sierra, President, Asociación General de Consumidores, ASGECO Confederación, SPAIN
Do Gia Phan, Vice President, Vietnam Standard and Consumers Association, VIETNAM