“This is not a radical change, it is not enough to truly protect consumers,” says John Lawford, executive director of the Center for Public Interest Advocacy.
Banks have already begun sending out notices of some of the changes they will need to implement when the rules go into effect on June 30th. credit cards, except in cases of gross negligence.
The new rules also cut up to 56 days after the first complaint is filed against a bank before someone can escalate the issue to one of the third-party appraisers. Previously, the rules allowed for a 90-day period after a bank made a second-tier decision, but the lack of transparency on the part of banks about the timing meant that the actual average time to referral to a higher court was about 130 days.
Since the Treasury Department sent out the initial consultation paper on the changes in late 2013, there has been increased concern about high-pressure selling and upselling tactics in the industry. The new rules now explicitly state that banks cannot “apply undue pressure” to sell a product or service, and that those products and services must “fit the individual” and their financial needs.
Relationships that remain transactional
But while the new system is forcing banks to improve their policies, it is not clear how efficient or effective the new rules will be.
“It doesn’t really change the fundamental relationship between banks and their customers, which is always transactional,” said Rene Kimmett, an intern at the Center for Public Interest.
The rules don’t go as far as establishing a fiduciary duty to act in the client’s best interest, as some securities laws do, she notes.
The amendments also do not include the financial product development rules used in Australia, the United Kingdom and the European Union, which require banks to develop products for the relevant target market and ask about the appropriateness of developing them early in product development.
These rules are particularly useful in protecting consumers who are offered products and services through push notifications and who are unable to ask questions about the product and its suitability for their purposes, explains René Kimmett.
The Consumer Protection Agency of Canada (FCAC), tasked with protecting the interests of the bank’s customers, said the new rules should address many of the sales tactics issues it raised in late May in a report jointly prepared with the agency. mystery shoppers. The paper notes that between 15% and 20% of mystery shoppers find product recommendations inappropriate, such as when offering premium credit cards that are not accompanied by questions about consumer habits or income. In general, mystery shopping results were worse for minority and Aboriginal customers.
For its part, the banking industry supports the changes brought about by the new structure, Matthieu Labreche, spokesman for the Canadian Bankers Association, said in a statement.
“Banks spend a lot of time, effort and resources to ensure that customers get products and services that are right for them and that they have agreed to receive. Banks undertake to comply with consumer protection measures. »
Two Competitors Complaints
Aside from the structure itself, critics such as René Kimmett also point out that while complaint handling times have been reduced, the problem remains that Canada has two external complaints bodies from which banks can choose. keep banks as customers by making decisions against them.
The federal government made a campaign promise to create a single external body to deal with complaints and reaffirmed its commitment to this year’s federal budget, but has yet to give a timeline for implementing the change.
The new rules also don’t protect consumers from unfair pricing, said Duff Conacher, co-founder of Democracy Watch, a Canadian advocacy group.
“The rules are not very comprehensive in terms of preventing abuse and discrimination and do nothing to stop (overpricing). »
In addition to better enforcement by the FCAC itself, Duff Conacher said, a much more effective federal government move would be to fulfill the Liberals’ campaign promise to expand the FCAC’s authority to review prices charged by banks and enforce changes. if they are redundant.
“It was promised, and it was a huge promise, because for the first time the ruling party promised to give the regulator the right to revise prices and introduce changes. »
Asked about plans to create a unified complaints body and give it increased powers, a finance ministry spokesperson confirmed budgetary commitments without providing further details, and said the government regularly reviews the structure of the financial sector and financial consumer protection.