A third-party review of the Ombudsman for Banking Services and Investments (OBSI) has found that the organisation is unable to fulfil a true ombudsman’s role because it lacks the authority to secure redress for consumers.
Lacks binding authority
Deborah Battell, the former banking ombudsman for New Zealand, and public law and litigation specialist Nikki Pender presented their findings on June 6. Their report found that Canada's OBSI is unlike financial services ombudsmen in other countries because it lacks the binding authority to force firms to pay the compensation it recommends.
"This drives its operating model and prevents it from fulfilling the fundamental role of an ombudsman, securing redress for all consumers who have been wronged," reads the report. "The real mischief, however, is not that some consumers receive less, but that OBSI’s current mandate allows this to happen. It, in effect, tilts the playing field in favour of firms. The fact this is happening in a complex industry that has a significant impact on people’s well-being, and in which customer literacy is generally low, is of concern."
Naming and shaming
Lacking real power, OBSI has resorted to "naming and shaming", i.e., publishing the names of firms who refuse to compensate consumers as alternative means of prompting redress. The report, however, notes that this has not been universally effective as some firms still refuse to pay. "Naming and shaming has, in fact, been counter-productive: publicising refusals has served to reinforce OBSI’s limitations and undermine public confidence in both the resolution system and the investment market," observe the authors.
Battell and Pender conclude that OBSI lacks the wherewithal to prevent future complaints from arising, improve the investment industry, or lift consumer confidence in the investment market. "In our view, therefore, OBSI is not a true industry ombudsman, it is a dispute resolution service," they say.