Against the odds: Why customers often lose in battles with banks

Banking customers with complaints about lost deposits face an uphill battle, according to a consumer advocate who says those looking for help resolving problems are left dealing with a complaints system that wears people down and most often finds in favour of the banks.

"Part of the problem here is that process takes far too long," says consumer advocate John Lawford.

Even for those who don't give up, he says, the odds of winning a dispute with a bank aren't good. 

• Been wronged? Contact Rosa and the Go Public team 
• Disappearing deposits: What happens when banks lose your money

CIBC client Siobhan Brenton of Fort St. John, B.C., is one of dozens of people who contacted Go Public about misplaced cheques, money transfers and deposits after we revealed how banks are under no obligation to make good on lost deposits. 

In 2014, Brenton was attending university in Australia.

The bank lost more than $4,000 of her tuition money when it sent an international wire transfer to the wrong place. Brenton says she fought to get her money back for more than a year, but gave up on the bank's internal complaints system after getting nowhere.

Everything's totally secret.— John Lawford, Public Interest Advocacy Centre

"I think it's terrible," she said. "They are happy to gather our business, they're happy to attract us… but when it comes to a mistake that was made on somebody, I was left out to dry."

Brenton paid her tuition with her credit card in order to graduate on time.

After Go Public's inquiries, CIBC apologized, and reimbursed Brenton for the entire amount, plus an "inconvenience adjustment" of $1,500.

"We process billions of transactions each year without issue," the bank said in a statement. "In the event where we make a mistake, we are committed to making it right for our clients.

Service agreements 'shocking'

In every province except Quebec, banks are allowed to disclaim liability for losing money, according to John Lawford, executive director at the Public Interest Advocacy Centre.

So if a bank takes a deposit and loses the cheque, he says, its agreement with the customer often states it is not liable for losses.

"Which is quite shocking from a consumer point of view," Lawford says.

"At the end of the day, if [customers] want to fight with the bank about this, they stand a good chance of being denied any compensation or losing in court. And that's very difficult for consumers to have that kind of legal disadvantage when they're also facing a large, deep-pocketed bank."

Lawford says consumers are often worn down by the complaints system and, even if they do escalate their complaint to the national level, the odds of winning are against them.

"Customers in most ombuds-services in other industries tend to win about 50% of the time or a little more," he says. With banking complaints, it's more like 30%.

"We just find that to be suspect, because when people come with a complaint they usually have a legitimate complaint, they've already gone through one or two steps with the bank themselves and likely there is something to their complaint and yet a lot of these complaints, more than half, are outright rejected."

'Not so independent'

He says what's needed is a fast and consumer-friendly process to deal with banking complaints.

Under the current system, banking customers first have to exhaust the bank's internal complaint process. Then they can go through the bank's own ombudsman, which is "not so independent" according to Lawford.

"They are employed by the bank, their performance is evaluated by the bank… we view that as generally an agent of the bank," he says.

The next step is taking the complaint to one of the banking dispute resolution agencies. In 2006, the federal government established the Ombudsman for Banking Services and Investments (OBSI) to deal with customer complaints.

But since 2011, TD Canada Trust, Royal Bank and National Bank have switched from the non-profit OBSI to the private and for-profit ADR Chambers Banking Ombuds Office (ADRBO).

"The trouble with ADRBO is they are paid directly by those banks… so there's always that suspicion that they're more favourable to the bank that's employing them," Lawford says.

ADRBO refutes that. In a statement to Go Public, the company says "all external complaint bodies are independent of its member banks and are not influenced by the payment structure."

The final step… is to "name and shame" the firm.— Mark Wright, OBSI director of communications

The company adds that it, as an external banking complaint body, is held to independence requirements set by the Financial Consumer Agency of Canada.

"ADRBO is committed to providing accessible, accountable, impartial and independent services," the company said. 

Lawford told Go Public that ADRBO lacks transparency.

"At ADRBO Chambers, everything's totally secret," he said.

"As a customer you have to sign a non-disclosure agreement. So in most cases, if the customer has been badly treated, no one will ever find out."

Consumers should feel when… the bank makes a mistake that the bank is going to fix it— Peter Julian, NDP finance critic

ADRBO turned down a request from Go Public for more information about its rulings — beyond what's in its annual reports — citing confidentiality. 

Its non-profit counterpart, OBSI, has some power, but it's limited. OBSI can only recommend compensation for consumers whose complaints are ruled to have merit.

"If a firm refuses to pay an OBSI recommendation, the final step in our process is to 'name and shame' the firm by publishing the details of the case," Mark Wright, OBSI director of communications said in an email.

But Wright says it's never come to that with banks.

According to OBSI numbers, in 2017 approximately 23% of banking complaints concluded with a recommendation for compensation to the consumer.

"There are many reasons why a consumer dispute may not result in a recommendation for compensation, but a significant reason, in our view, is the level of complexity of financial products, services and regulation," Wright says.

As a last resort, consumer complaints can also go the Financial Consumer Agency of Canada. 

But Lawford says it "very rarely" fines a financial institution and usually does not name it.

Go Public reviewed the FCAC's decisions and found, in the 17 years since its inception, there have been 128 decisions, 28 of which resulted in penalties for the banks totalling $2.1 million. 

Consumer protection delayed

After a series Go Public investigations into bank employees feeling pressured to upsell customers, a parliamentary review was held to look into problems within the banking industry.

The resulting report was scheduled for release late last year then delayed to sometime this spring.

Federal NDP finance critic Peter Julian says the federal government needs to move things along more quickly.

"Consumers should feel when they make a deposit with the banking system or they have a transaction with the banking system and the bank makes a mistake that the bank is going to fix it. and what we need is a system of checks and balances that ensures the banks fix their errors."

Chloe Luciani-Girouard, spokesperson for the minister of finance, says the government "expects that all financial institutions adhere to the highest standards when it comes to their consumer protection obligations," adding that Ottawa has "full confidence" in the review being done.

"Once the FCAC has submitted its report, the Minister will be in a better position to take under consideration recommendations by the Commissioner to improve the financial consumer protection regime," wrote in an email to Go Public.

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