CG-13 Application guide for external complaint bodies

From: Financial Consumer Agency of Canada

Publication date: April 10, 2013
Effective date: September 2, 2013

Modified on February 9, 2016, to include Frequently Asked Questions

1. Definitions

The following definitions apply in this guide.

Applicant

The applicant means a “body corporate” incorporated under Canada Not-for-profit Corporations Act or under the Canada Business Corporations Act, whose purpose under its letters patent, in the Minister’s view, is dealing with complaints made by persons having requested or received products or services from its member financial institutions that have not been resolved to the satisfaction of those persons under procedures established by those financial institutions under paragraph 455(1)(a) of the Bank Act.

Investigator

An investigator is an individual who is appointed by the external complaint body (ECB) in connection with a complaint to conduct the investigation.

Dispute resolvers

A dispute resolver is an individual who is appointed by the ECB to consider and make final recommendations with respect to complaints.

Member

Member has the same definition as in the Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations.

Complaint

Complaint has the same definition as in the Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations.

Regulations

The Regulations refer to the Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations.

2. Approval criteria

Pursuant to section 455.01 of the Bank Act, upon the recommendation of the Commissioner of the Financial Consumer Agency of Canada (FCAC), the Minister may approve a body corporate whose purpose under its letters patent, in the Minister’s view, is to deal with complaints made by persons having requested or received products or services from its members, that have not been resolved to the satisfaction of those persons under procedures established by those financial institutions under paragraph 455(1) (a).

Before making an approval under subsection 455.01(1) of the Bank Act, the Minister may take into consideration the Commissioner's recommendation. The Commissioner will take into account the following:

  • the ability of the body corporate to deal with complaints made by persons having requested or received products or services from its members, that have not been resolved to the satisfaction of those persons as described above
  • the reputation of the body corporate for being operated in a manner that is consistent with the standards of good character and integrity
  • the ability of the body corporate to be accessible, accountable, impartial and independent, and to discharge its functions and perform its activities in a transparent, effective, timely and cooperative manner
  • the policies, procedures and terms of reference governing its functions and activities that would enable it to meet the conditions under Section 7 of the Regulations.

3. Application process

Following submission of a draft application, FCAC’s Compliance and Enforcement Branch (CEB) will review the application request and supporting information during a pre-application period to ensure that all required documents have been included and to request any further information from the applicant that it may require. Once FCAC is satisfied that all necessary information has been received and reviewed, CEB will advise the applicant that the application is certified as complete.

3.1 Pre-application review procedure

  • A body corporate intending to apply to FCAC to become an approved ECB should file two (2) copies of its draft application with FCAC.
  • FCAC will review the draft application and may contact the applicant to discuss its completeness, status and outstanding issues.
  • FCAC will respond to applicants on a timely basis, and where necessary request additional information from the applicant.
  • To avoid delays in the processing of its application, applicants are expected to provide any further information requested within the timeframes established by FCAC.
  • If any of the information submitted by the applicant to FCAC is changed, replaced or amended, applicants are expected to advise FCAC of the change as soon as possible.
  • CEB will review the draft application for completeness.

3.2 Application procedure

  • A draft application package will be certified as complete by FCAC when all requested information is received in a manner satisfactory to the Commissioner, and the applicant will be instructed to submit a formal letter of application to the Commissioner requesting that the Minister approve the application submitted to FCAC pursuant to subsection 455.01(1) of the Bank Act.
  • FCAC will provide the applicant with an application receipt indicating the date on which the Commissioner received the application, and a further receipt when the Commissioner’s recommendation is submitted to the Minister.
  • Applicable notices will be published, pursuant to subsection 455.01(5) of the Bank Act, in the Canada Gazette.

4. Information requirements

It is incumbent on the applicant to demonstrate how it meets the various principles and requirements set out in the Act and the Regulations, through the information it provides to FCAC in its application. FCAC will review each applicant on a case-by-case basis, recognizing that each proposed ECB may have a different approach for meeting the requirements in the Bank Act and the Regulations.

4.1 General information

General information is needed to accurately identify the applicant. The applicant must provide:

  • the proposed English and French names by which the applicant proposes to operate
  • the location of the head office
  • the name, position and telephone number(s) of the contact person(s)
  • a letter authorizing FCAC to discuss the application with the contact person(s).

4.2 Terms of reference

Terms of reference are established to describe the purpose and scope of the operations of the ECB. Terms of reference are to be made available to the public and must be provided to FCAC. The applicant’s terms of reference should include the following:

  • the mandate of the ECB
  • the responsibilities, powers and duties of the investigators and dispute resolvers
  • the scope and nature of the complaints that the ECB will handle
  • the types of complaints that fall outside its terms of reference
  • the process for handling complaints
  • information on its constitution and governance structure and senior management of the ECB
  • details on the board and/or senior management’s role in managing the ECB, including details on how the board and/or senior management will ensure that the ECB is managed with good character and integrity
  • the terms and conditions for membership and membership fee structures for services provided
  • information on how the ECB will ensure confidentiality and privacy of the parties to a complaint
  • information on how the ECB will meet public reporting requirements
  • a list of members or potential members
  • a statement that the ECB will be subject to a third-party evaluation of the discharge of its functions and performance of activities, as required in the regulations
  • any other information relevant to the mandate, purpose and objects of the ECB.

4.3 Corporate information

The applicant must provide FCAC with evidence of corporate authorization, including copies of:

  • the applicant’s articles of incorporation and any by-laws
  • any other pertinent evidence of corporate authority.

4.4 Policies and procedures

The Regulations specify that the ECB must have policies and procedures in place to ensure it is accessible, accountable, impartial and independent, and discharges its functions and performs its activities in a transparent, effective, timely and cooperative manner. In addition, the body must be operated in a manner that is consistent with the standards of good character and integrity.

In the context of its application, the applicant must provide evidence that it has developed appropriate policies and procedures to meet key elements set out in the Regulations, but must also provide information regarding how the ECB will ensure that these policies and procedures are understood internally and externally, are followed by those within the ECB responsible for delivering on these policies and procedures, and the steps that the ECB will take to ensure the ongoing effectiveness of the policies and procedures.

4.4.1 Good character and integrity

The ECB must be operated in a manner that is consistent with the standards of good character and integrity. It is incumbent upon the applicant to demonstrate that it has addressed the issues of responsible persons, business records and experience, and financial viability to meet the standards. The application should show:

Responsible persons
  • the ability of the body corporate to be operated responsibly by persons with the competence and experience suitable for involvement in its operation; the application must include
    • the processes for assessing the initial and ongoing suitability and integrity of directors and persons who play a significant role in the management or dispute resolution processes of the ECB, including a process to collect, retain and review the information
    • adequate screening, criminal record searches and other measures to minimize the risk of illegal conduct by directors, senior officers and dispute resolvers in carrying out the ECB’s day-to-day affairs
  • information on the selection and oversight of investigators and/or dispute resolvers
Business records and experience
  • the business records and experience of the applicant, including
    • a brief history of the applicant, including a summary of its experience in complaint handling, mediation or dispute resolution
    • the applicant’s business strategy, including any implementation strategy and staffing plan to provide services and an analysis of business risks
Financial viability
  • evidence that the applicant has sufficient financial resources to support the ongoing and long-term operations of the ECB or would have access to the financial resources to enable it to do so, including
    • a demonstration of the adequacy of anticipated capital expenditures and an explanation of the capital expenditure financing strategy
    • supporting information, such as an attestation from a reputable external auditor and letters of support from investors and/or affiliates attesting to the financial viability of the body corporate.

4.4.2 Accessibility

The applicant must ensure that complaint-handling is easily accessible and available at no cost to consumers. ECBs must have adequate policies, procedures and processes in place to accept any bank or authorized foreign bank as a member.

It is incumbent upon the applicant to demonstrate how the ECB will be accessible to consumers, banks and authorized foreign banks. At a minimum, the applicant must indicate how the following information is incorporated in its policies and procedures:

Accessibility to consumers
  • the provision of services to consumers across Canada in both official languages
  • the provision of services to consumers free of charge
  • the availability of information on how consumers will be able to contact the ECB
  • the ability to allow consumers to communicate by writing, email, fax or electronically with the ECB (how to submit complaints)
  • the availability of information about the complaint-handling process to consumers written in language that is clear, simple and not misleading
  • the process to inform complainants about its terms of reference and procedures for dealing with complaints, and to provide information to assist them in understanding those requirements
Accessibility to members
  • the process to inform members about its terms of reference and procedures for dealing with complaints, and to provide information to assist them in understanding those requirements.

4.4.3 Accountability

The Regulations require that ECBs be accountable to consumers, members and FCAC. The applicant must demonstrate that policies or procedures are in place to ensure accountability, including but not limited to the following.

Annually, ECBs must
  • consult with its members, and with persons who have made complaints to it since the previous consultation, in regard to the discharge of its functions and performance of its activities as an ECB
  • report the findings of said consultation to the Commissioner and make the findings publicly available through its annual report
  • report complaint related data as required by the Regulations.

The ECB must also do the following in relation to its engagement with FCAC as required by the regulations:

  • report regularly to FCAC
  • report any systemic issues to the Commissioner without delay
  • undertake an evaluation by a third party of the discharge of its functions and performance, in accordance with terms of reference established in consultation with the Commissioner every five years, and make the findings available to the public
  • monitor and assess the board of directors’ and/or senior management’s commitment to and delivery of regulatory requirements, including the complaints process.

4.4.4 Impartiality and independence

The ECB and those who act on behalf of the ECB in connection with a complaint must be seen to be impartial, unbiased and independent when dealing with complaints. At a minimum, FCAC expects the applicant to demonstrate that the investigators and dispute resolver(s), whether employed by the ECB or engaged under contract:

  • have no previous involvement with the case
  • have no personal or pecuniary interest in the outcome of any particular case
  • are not compensated or evaluated for their performance based on the outcome of any particular case
  • maintain a professional designation or be required to receive ongoing training in dispute resolution
  • have established procedures for addressing and dealing with cases, conducting investigations and rendering decisions
  • have well defined terms and conditions for employment, including clear processes for performance management
  • are solely responsible for their recommendations and not subject to review or change by senior management or others in the organization who have not been involved in the process.

The applicant must also demonstrate how it will seek to ensure that persons who act on its behalf in connection with a complaint will do so in a manner that avoids conflicts of interest and is impartial in his or her execution and is independent of the parties to the complaint. This must include the following:

  • information on the ECB’s investigators and/or dispute resolvers’ professional standards, such as experience, training, designations, etc.
  • policies governing ethics and conflicts of interest
  • training requirements
  • details about how investigators and dispute resolvers are hired or engaged, including a description of their responsibilities, the terms and conditions of their appointment and any reporting relationship to senior management and/or the board of directors
  • details of the investigators and dispute resolvers’ compensation structure and performance evaluation
  • monitoring and assessment of the application of the policies and procedures.

The applicant must also have policies and procedures in place to demonstrate how these principles will be implemented by the ECB.

To ensure the impartiality and independence of the complaint resolution process, the relationships between the applicant ECB and its members (contractual, financial, business or otherwise) should not impact or be perceived to impact the outcomes of the complaints resolution process. To this end, the ECB will need to demonstrate that it:

  • reviews and evaluates, on a regular basis but no less than once per year, any significant financial, business and other relationships between it and any of its members to assess whether there is any actual or perceived impact on its independence or impartiality
  • undertakes this assessment of relationships with its members in the light of what a reasonable and informed third party would likely conclude could or be perceived to impact said processes
  • ensures that all the specific facts and circumstances available to the ECB at the time are appropriately considered and weighed in the context of the relationship assessment
  • takes the necessary steps to eliminate, or reduce to an acceptable level, any actual or perceived risks associated with said relationships, through the application of appropriate standards and/or safeguards as required
  • has a process to report to the Commissioner of FCAC the findings and outcome of the review and assessment upon completion.

The applicant must also provide FCAC with the following information, where applicable:

  • a corporate structure chart (showing percentages of voting and non-voting shares owned) for the applicant and any parent corporation, including all affiliates of the applicant and any parent company
  • a list of all classes and attributes of voting and non-voting shares
  • a certified or authenticated list of all shareholdersFootnote 1  and board members
  • the name and address of each director who directly or indirectly beneficially owns more than 10 percent of any class of shares of the applicant, including
    • the number of shares held
    • the class and attributes of the class
  • the current employer/occupation of each director and relationships to shareholders, if any
  • any agreements or arrangements among shareholders of the body corporate or any agreements or arrangements between or among any holding company and any affiliated corporation of the body corporate related to the governance or management of the body corporate
  • projected staff complement of the organization and a complete organization chart that clearly identifies reporting lines for senior positions, key responsibilities within the ECB and a description of the functions the identified individuals will perform
  • details on all sources of debt and equity funding for the ECB, as well as funding received from members, including any formula to calculate membership fees
  • information on and examples of the arrangements and contractual relationships between the ECB and its members.

4.5 Discharge of functions and performance of activiti​es

The applicant must identify how it will discharge its functions and perform its activities in a transparent, effective, timely and cooperative manner.

4.5.1 Transparency

FCAC expects the applicant:

  • to demonstrate how the ECB will make available to the public information on its terms of reference, complaint data, complaint-handling process, results, procedural rules, operations, membership and funding
  • to establish data collection and retention standards
  • to inform the parties to a complaint of the existence of applicable limitations period
  • to undergo a third-party evaluation, overseen by the Commissioner of FCAC, every five years with the results publicly available.

4.5.2 Effectiveness

To ensure that consumers and the satisfactory resolution of complaints would be the focus for all ECBs, the applicant must show:

  • how its complaint-handling procedures and outcomes are suited to the nature of the complaint
  • how senior management demonstrates its commitment to these principles through the provision of training and resources
  • its process for notifying and providing supporting information to FCAC on systemic issues, leaving the role of investigation of such issues to FCAC.

4.5.3 Timeliness

FCAC expects the applicant to demonstrate that a final written recommendation regarding complaints would be provided no later than 120 days after the day on which the information that it requires to deal with the complaint, as set out in its terms of reference and procedures, is complete.

If a consumer has a complaint that is not covered by the ECB’s terms of reference, it must have a policy of notifying the consumer with a written reason within 30 days after receipt of the complaint.

4.5.4 Cooperation

FCAC expects each applicant:

  • to have a membership acceptance protocol(s) with clear membership requirements
  • to demonstrate how it will cooperate and resolve disputes with members
  • to have policies and procedures in place to ensure that complainants with pending cases of any new member that joins an ECB from another ECB are notified without delay of this change
  • to have policies and procedures in place to transfer a complaint received by it and all related information that is in its possession or control to another ECB without delay if a member becomes a member of another ECB before a final recommendation is made in respect of the complaint
  • to have procedures to ensure that sufficient, pertinent and timely information regarding decisions is communicated to members
  • to have procedures to direct persons who have made complaints to the correct ECB if the bank or authorized foreign bank is not member of that ECB.

 Frequently Asked Questions

1. Question

According to subsection 7(n) of the Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations, ECBs are required to submit an annual report to the Commissioner on the discharge of their functions and performance of their activities as external complaints bodies and include prescribed information in the report. The report must then be made public without delay after it is submitted to the Commissioner.

What is the expected time frame for submitting this report for the first year of operation of the ECB and moving forward?

Answer

The report for the first year of operation should cover the activities from the date the ECB received approval to October 31.   

Annual reports are to be submitted within 135 days after October 31 of each year.

2. Question

Subsection 7(o) of the Complaints Regulations requires ECBs to publicly report complaint data.

Do all ECBs report in exactly the same way?

Answer

Paragraphs 7(n)(ii) and 7(n)(iii) of the Complaints Regulations require an ECB to report the following complaint data:

  • the number of complaints received
  • the complaints that it determined were within its terms of reference (TORs)
  • the number of final recommendations
  • the number of complaints that, in its opinion, were resolved to the satisfaction of the persons who made them and
  • the average length of time taken to deal with complaints

Subsection 455.01(1) of the Bank Act stipulates that the Minister may approve more than one ECB and each ECB determines its own TORs. If the TORs differ, it is expected that complaint data would be reported differently, as they would be dependent on what each ECB considers to be within and outside of its TORs. ECBs are required to publicly disclose their TORs.

3. Question

Subsection 7(k) requires ECBs to “deal with complaints in a manner that affects only the parties to them”.

Does that mean that ECBs no longer investigate many of the complaints they currently receive? For example, complaints related to joint deposit accounts, joint chequing accounts, residential (family) mortgages, joint lines of credit, and jointly held investment accounts could all potentially be covered by this section.

Answer

The intent of this subsection is to ensure that ECBs focus on the individual complaints that they receive. If consent is withheld or not given by all parties to the joint account, the ECB cannot deal with the complaint in a manner that affects the non-consenting party.

If, in the course of their investigation, the ECB finds that other bank clients may be similarly impacted, it is required to report this potential systemic issue to FCAC, as per subsection 7(i).  For example, if an issue is identified with mortgage prepayment disclosure that affects more than one consumer, the ECB must report the underlying issue to FCAC.   

In our view, ECBs are not to investigate the following types of complaints but are required to report them to FCAC:

  1. class-action-type complaints or where a complaint uncovers a systemic issue. This type of complaint refers to a shared issue that affects more than one person. The ECB should investigate the individual’s complaint, but not the collective complaint.
  2. a complaint received from a person (third party) complaining on behalf of another person where consent is not received from the party to the complaint..Footnote 2  

4. Question

According to subsection 7(l) of the Complaints (Banks, Authorized Foreign Banks and External Complaints Bodies) Regulations, ECBs are required to “make a final written recommendation to the parties no later than 120 days after the day on which the information that it requires to deal with the complaint, as set out in its terms of reference and procedures, is complete”.

How should the ECB determine this date?

Answer

ECBs’ policies and procedures should clearly include a process ensuring that investigators obtain the required information from the parties to the complaint. For example, the internal procedure should require the ECB investigator to conduct interviews and collect the required information from both parties promptly. The date when all of the information is received by the ECB should be tracked in the ECB’s database.

ECBs have noted that, in some cases, the complainant is not available or does not provide all the information at the outset of the investigation. In other cases, the bank does not provide all information when contacted. In such cases the 120-day timeline does not begin until the complainant and the bank have provided all relevant information.

Internal procedures should require that the investigator document the attempts to reach the complainant and follow up. Should the complainant not contact the ECB within a reasonable timeframe, as stipulated in the internal procedures, the complainant should be advised that the file will be closed pending receipt of the requested information. ECB contact information should be provided, with a reference number, in case the complainant wishes to pursue the complaint at a later date, bearing in mind that there is a timeline to complain to the ECB, as per its TORs.

ECBs should be aware that section 9 of the Regulations requires a bank to provide the ECB of which it is a member with all information in its possession or control that relates to a complaint without delay after the ECB notifies it that the complaint has been received. The bank is expected to cooperate fully with the ECB’s request pertaining to the complaint.

However, should an investigator not follow the internal procedures of the ECB, the “start date”Footnote 3   should not be suspended or restarted. Under subsection 7(l), the 120-day period starts from the day “on which the information that it requires to deal with the complaint, as set out in its terms of reference and procedures, is complete.” Information does not mean internal assessments.

For example, if an investigator fails to conduct an interview with the complainant, and as a result does not gather all the relevant information, the 120-day timeline will not be re-started. Similarly, if the investigator did not disclose a conflict of interest, the 120-day timeline should not be re-started. The date the investigator initially determined that all the information was received should continue to be considered the “start date” for calculation of the 120-day timeline. The final written recommendation should not be delayed solely owing to the errors/omissions of an investigator.

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