Mr. Chair, members of the committee, my name is Wanda Morris, and I am the Chief Advocacy and Engagement Officer for CARP.
CARP comprises over 300,000 members and 20 chapters across the country. Our members are politically engaged, 98% of them voted in the last federal election, and in our most recent poll, 98% said they would be voting in the next one.
Canadians can be justly proud of our banks. While other countries suffered severe economic fallout from the collapse of their financial institutions, Canada's stood strong. Banking customers have benefited from the security, and anyone who has owned bank stocks knows that bank investors have done well too.
However, this strength comes at a cost to consumers. Checks and balances are needed, and CARP is pleased to see that this draft legislation addresses a number of important issues, such as whistle-blower protections, increased maximum fines and the prohibition of the use of the ombudsman title for internal bank staff.
CARP proposes to focus on one key issue in its submission today. Right now, 70% of banking customers do not have access to a fair and impartial ombuds office in the event of a complaint. This is not right. When the Ombudsman for Banking Services and Investments was originally created, all banking and investment dispute resolutions were done under one roof. A previous government opened up the possibility of a for-profit alternative. Since ADRBO was then approved as competition to OBSI, consumer confidence has plummeted.
I want to be very clear on my next point. CARP and its coalition of consumer agencies, and our full membership, believe competition in dispute resolution is not fair, is not right, and furthermore, is an election issue. The only voices in favour of competition for dispute resolution services are those of the banks.
CARP conducted a recent and robust poll with members across the country on the ombuds question. Some 94% support one single not-for-profit ombuds office. CARP members, and seniors in general know, as frankly all reasonable people should know, that having a bank “buy its own referee” is fundamentally unfair. More than one-third of banking disputes come from seniors, but whatever the age of the complainant, these disputes are a David and Goliath issue.
Ordinary Canadians simply do not have anything like the power of the banks, with their enormous resources, to fight for their rights. This puts Canadian consumers at a tremendous disadvantage and it should not be so.
I encourage the committee to reference the analysis conducted by FAIR Canada, the Canadian Foundation for the Advancement of Investor Rights, entitled “Comparing OBSI to ADRBO (2018)”. FAIR has created a compelling chart highlighting the differences between OBSI and ADRBO. FAIR's analysis makes clear that customers whose banks use ADRBO for dispute resolution are served less well in terms of governance, transparency and results. OBSI appears to find results in favour of customers at 2.77 times that of the rate of ADRBO.
Investor advocates recognize this disparity, and it is clear that banks do as well. Since its initial adoption by TD and Royal Bank, other banks have moved from the non-profit OBSI to the for profit ADRBO, with Scotiabank being the latest bank to leave. Banks have suggested they are leaving due to timeliness or effectiveness issues at OBSI. Research comparing the two dispute resolvers contradict this claim, as have independent reviews done in 2011 and 2016.
Canadian bank consumers should have the same protections they used to have, that all Canadian investors have, and that all comparator jurisdictions have, like Australia, New Zealand, the U.K. and Ireland.
Allowing competition from a for-profit provider has created a clear conflict of interest, an incentive to resolve disputes in favour of the party to the dispute that is paying the bill, the bank. This isn't conjecture. This is actually happening.
While we might criticize banks for using a dispute resolver that reduces their claims and costs, in a competitive marketplace the flaw is not with the banks, but with the system that allows this flawed process to exist. This matter can be fixed with the stroke of a pen. It does not require legislative change.
CARP calls upon the finance committee to recommend changes to regulations to ensure that all Canadian banking consumers have access to one independent, fair, impartial not-for-profit dispute resolver. There is already one such dispute resolver for investment firms: OBSI. OBSI should also be the single firm used for banking customers.
I'm happy to take your questions.