Bank complaint system wholly inadequate, FCAC review finds

The review of Canada's Big Six banks released on Feb. 19, 2020 by the Financial Consumer Agency of Canada (FCAC) found the banks have no clear process for dealing with complaints and the average time to resolve them can take up to seven months, which is far longer than the 90-day requirement.



The review found more than five million Canadians file at least one complaint with a bank each year. It said 76 % of those "relatively simple complaints" are resolved at the first point of contact. It appears 24% go into a kind of black hole.



The review found that in general, the Senior Complaints Officers (SCOs’) reporting procedures are underdeveloped. Most could not produce or describe the steps taken to verify and ensure the accuracy of information about their activities (such as the number of complaints resolved to consumers’ satisfaction), which they are required to report publicly. FCAC found a number of inconsistencies in the SCOs’ records during the review of complaint investigation files, such as incorrect records of the date when the complaints were received at the second level. Even more shocking -most SCOs have a narrow interpretation of the reporting requirements in the Bank Act -most do not have the authority to reimburse consumers or impose settlements on business units contributing to the delays in resolving client complaints. In other words, the complaint system is unmanaged and designed to fail.



Complainants kept in the dark



More than 90% of consumers whose complaints weren't resolved satisfactorily at the first point of contact did not escalate the complaint, a troubling figure.



It also found banks' procedures are not accessible, timely or effective when it comes to cases that aren't resolved by frontline staff and that the ability to resolve more of those cases "declines significantly" when consumers escalate their complaint.



The FCAC found clients who escalate complaints "tend to experience fatigue and frustration" because of inefficient bank procedures .Lengthy delays cause clients to drop their complaints before they are resolved leaving them exposed to uncompensated losses.



Staff training 'generally inadequate' or 'totally absent'



The review found banks' procedures for handling complaints objectively "are inadequate," noting the same frontline staff who deal with them "are under pressure to make sales and control costs, and these pressures may influence their decision to reimburse the customer." This in in direct breach of  FCAC’s CG-12 Internal dispute resolution rule.



Banks are required to provide clients with brochures in their branches about their complaint-handling process. The FCAC found employees don't know when to give brochures, which in some cases do not provide clear information on escalating the complaints process and in one case contained outdated information. Based on our review , most brochures provide incorrect information as regards access to an External Complaints Body.



Long cycle time



FCAC CG-12 require banks to resolve the majority of complaints within 90 calendar days, which the review said is about 50 % longer than the standard in the U.K. and twice as long as permitted in Australia. 



FCAC guidelines don't require the 90-day clock to start until the complaint has been escalated to a bank's senior complaints officer, "which means the time consumers spend going through various steps at the first level is not counted." It points out most jurisdictions start the clock when the complaint is first submitted. This is one of many deficiencies inherent in CG-12.



The review found 4 unidentified banks take anywhere from 107 to 207 days instead of the required 90 days. Only two of the banks reviewed complied with the stipulated timeline, resolving complaints on average in 88 and 89 days, respectively . Enhanced FCAC enforcement with meaningful sanctions would quickly address this issue.



Areas for improvement



The report cited a number areas where banks must deal more effectively with complaints, such as:

1.   Implementing robust policies and procedures to ensure escalated complaints are handled consistently and effectively.

2.   Doing a much better job of monitoring, assessing and improving complaint-handling procedures.

3.   Improving employee training programs, which are currently largely informal.

4.   Ensuring complaints are resolved objectively and implementing comprehensive and well-developed  client reimbursement policies

5.   Bringing cycle time into compliance with the regulations and international standards.

Our take on the report

·        Complainants become fatigued by the complex process and unduly drop legitimate complaints against the banks

·        Complainants are being short changed in the resolution of their complaint

·        Complainants suffer collateral financial harm as a result of poor and slow complaint handling

·        There are too many stages in the bank complaint process-The internal ombudsman step should be removed

·        The banks do not provide required public statistical summary reporting as required by CG-12

·        FCAC CG- 12 is an inadequate standard for modern complaint handling

·        The FCAC needs to treat complainant exploitation and non-compliance with regulations more seriously through robust enforcement actions

·        There are non-financial impacts of poor complaint handling including emotional distress and harmful physical health issues  

·        There is no evidence that the banks use complaint information to improve products or services

It is now up to the finance minister to respond to the report and ensure client protection is improved. A time-delaying consultation is not necessary as the facts point to the required action(s).