Brokers are watching closely whether the government will allow Canadian banks to opt out of a federal arbitration system tracking and investigating systemic consumer problems.
“The banks essentially want to write their own rules,” said David O’Gorman, broker/owner of Mortgage Land Inc. in Markham, Ont. “At least two have already left OSBI (ombudsman for Banking Services and Investment) and gone with private arbitrator.”
Brokers argue that there are many instances of unfair practices by the banks that impact their clients. The wholesale move away from the quasi-governmental arbitrator would only compound the frustration of clients, they say.
“Excessive mortgage repayment fees and the whole collateral mortgages issue are among the glaring examples of bank practices that should be brought to light,” said O’Gorman. “Systemic issues should be identified and tracked or else they cannot be dealt with.”
The banks created OSBI in 2002 when it became clear that Ottawa was on the verge of compelling the financial institutions to come under a federal arbitrator. Both TD and RBC have left the quasi-independent OSBI and hired ADR Chambers, a private arbitrator instead. Lately, banks have been asking the federal government to take away OSBI’s tracking and investigating powers.
“While we understand the government’s desire to identify and deal with systemic issues within the banks, we believe the existing measures…already accomplish that objective,” read a letter sent to Finance Minister Jim Flaherty from the Canadian Banker’s Association.
The CBA is arguing that the banks should be the ones to decide if a client complaint needs to be elevated to the federal regulatory level.
The 2011 annual report of OSBI indicates that it opened 397 banking service-related cases for that year. The top three areas of consumer complaints were: Transaction accounts (103 complaints); Mortgages (102); and credit cards (71).
Markham-based O’Gorman also expressed doubts on the effectiveness of any “self-policing” system for the banks. For instance, he told MortgageBrokerNews.ca, the objectivity and accuracy of findings by a private arbitrator paid by s bank could be considered “dubious.”
O’Gorman is calling for broker associations such as CAAMP to lobby for arbitration directly administered by a federal authority such as OSFI.