Banks generate most complaints to new federal consumer agency

(January 23, 2003) The Financial Consumer Agency of Canada received more than 5,000 complaints in its first year of operation, mostly concerning the big banks. Only 300 of those complaints involve a breach of consumer protection legislation, says commissioner Bill Knight.

“We’re like a regulator panning for gold,” Knight said today during a presentation at the Financial Forum in Toronto. “Those 300 complaints are key to enhancing the marketplace from the standpoint of ensuring the law is enforced, whether it’s a major or a minor issue.”

The FCAC is an independent agency established in October 2001, by the federal government. Its mandate is to protect and educate consumers and ensure that federally regulated institutions, such as banks, comply with rules and regulations. In total, the agency received 11,000 inquiries in its first year.

The bulk of the 5,000 complaints are minor, Knight said.

“A lot of the complaints are about the opening of accounts,” he said after the presentation. “There’s still a lot of concern about bank branch closures, both in cities and in rural areas. There are a lot of issues around credit cards, and understanding interest rate charges and service fees.” Loans and mortgages, as well as quality of service, were also concerns, he added.

Most inquiries are passed on directly to the banks, Knight says, who have their own ombudsman to handle complaints. “Banks do pay attention and will provide redress.”

The FCAC does have the power to issue a financial penalty of $100,000 against federal institutions, and $50,000 against individuals working in those institutions who break the law. The agency can also make that information public. Knight says the latter is the real deterrent. “It’s not the money — it’s the hit against the brand.”

So far, the agency has fined one minor Canadian financial institution, Knight says, but he provided few details. “It was more related to processes, not consumers,” he told Advisor.ca. “Most of the major issues relating to consumers have been resolved by compliance agreements.”

As well as banks, the FCAC monitors and supervises federally regulated insurance companies, trust and loan companies and cooperative credit associations.

Earlier this week, Canadian Securities Administrators chair Doug Hyndman told Advisor.ca investor complaints to the country’s securities regulators were on the rise, likely due to weak markets. The bulk of those complaints were related to financial advice, such as investment suitability.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca