The long wait for shorter waiting times to resolve banking complaints is nearly over as part of a series of banking regulatory updates set to come into effect.

The reforms are contained in a new financial consumer protection framework that aims to address loopholes in the system, but despite nearly a decade of development, critics say the changes are more minor tweaks than a fundamental fix to problems.

“It’s not a sweeping change, it’s not enough to really protect consumers,” said John Lawford, executive director of the Public Interest Advocacy Center.

Banks have already started sending out notifications about some of the changes they will need to implement when the rules come into effect on June 30, such as alerts when an account balance drops below $100 and new rules limiting liability for lost or stolen credit. $50 cards, except in cases of gross negligence.

The new rules also reduce the number of days to 56 after a complaint is first filed against a bank before someone can take the issue to one of the third-party assessors. Previously, rules allowed for escalation 90 days after it was escalated to the bank’s second level of resolution, but a lack of transparency from banks about the timeline has helped push the actual average time to escalate a claim to around 130 days.

Since the finance department sent out an initial consultation paper on the changes in late 2013, concerns about high-pressure sales tactics and upselling in the industry have also grown. The new rules now specifically state that banks cannot “impose undue pressure” to sell a product or service, and that such products and services must be “appropriate to the person” and their financial needs.

But while the new framework forces banks to improve their policies, it is unclear to what extent the new rules will be enforceable or effective.

“It doesn’t really change the fundamental relationship between banks and their customers, which is always transactional,” said Rene Kimmett, an intern at the Public Interest Advocacy Center.

The rules don’t go so far as to establish a fiduciary duty to act in the client’s best interest as some securities laws do, she noted.

The amendments also do not incorporate financial product design rules that are used in Australia, the UK and the EU, which require banks to design products for an appropriate target market, shifting the issue whether a product is appropriate earlier in product development. arrange.

These rules are particularly helpful in protecting consumers who are offered products and services via push notifications without having the opportunity to ask questions about the product and its suitability for achieving their goals, Kimmett said.

The Financial Consumer Agency of Canada (FCAC), which is charged with protecting the interests of bank customers, said the new rules should address many of the concerns about sales tactics it has raised. at the end of May. The agency’s report noted that about 15-20% of mystery shoppers found product recommendations inappropriate, like premium credit cards without asking about spending habits or income, with poorer results. for visible minority and Aboriginal clients.

For its part, the banking industry supports the changes brought about by the new framework, Canadian Bankers Association spokesman Mathieu Labrèche said in a statement.

“Banks spend a lot of time, effort and resources to ensure that customers receive products and services that are right for them and that they have consented to receive. Banks undertake to respect consumer protection measures.

Beyond the framework itself, critics like Kimmett also note that while complaint handling time has improved, the problem remains that Canada has two external complaints bodies for banks to choose from, resulting in a biased incentive for both organizations to keep the banks as customers. while making decisions against them.

The federal government made a campaign promise to establish a single external complaints body and recommitted to it in this year’s federal budget, but has not yet given a timeline for implementing the change. .

The new rules also do nothing to protect consumers from unfair pricing, said Duff Conacher, co-founder of Democracy Watch, a Canadian advocacy organization.

“The rules are not very comprehensive in terms of stopping abuse and discrimination, and do nothing to stop abuse.”

He said that in addition to better enforcement by the FCAC itself, a much more effective action by the federal government would be to follow through on the Liberals’ election promise to increase the powers of the FCAC to review prices charged by banks and impose changes if they are excessive.

“It was promised and it was a huge promise, because this is the first time that a ruling party has promised to give a regulatory agency the power to review prices and impose changes.”

Asked about plans to create the single complaints body and enact enhanced powers, a finance ministry official reiterated the budget commitment without providing further details, and said the government regularly reviews the framework. of the financial sector and the protection of financial consumers.

Ian Bickis, The Canadian Press

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