On October 27, 2021 and November 22, 2021, the Financial Consumer Agency of Canada (FCAC) issued proposed Guidelines in support of two key areas related to the new Financial Consumer Protection Framework (“FCPF”) (see our blogpost series on the FCPF) which is scheduled to come into force on June 30, 2022. The long-awaited proposed Guidelines on Complaint-Handling Procedures for Banks and Authorized Foreign Banks and on Appropriate Products and Services for Banks and Authorized Foreign Banks are intended to set out clear principles and FCAC resulting expectations to assist Banks in developing and implementing their policies and procedures on complaint-handling and the sale of appropriate products and services.

Guideline on Complaints-Handling Procedures

The Guideline espouses three key principles Banks will be expected to consider when developing their complaint-handling policies and procedures:

1. Effectiveness – policies and procedures are expected to be comprehensive and applied consistently.

Banks will be required to designate an employee responsible for the implementation of their complaint-handling policies and procedures, and have one or several designated employees, with the requisite title, experience, competencies and authority to deal with and resolve complaints.

In addition, their policies and procedures will have to include measures to:

1. monitor complaints and provide consumer feedback mechanisms;
2. ensure consistency, fairness and objectivity in the treatment and resolution of complaints;
3. analyze complaint data (to strengthen compliance);
4. provide formal and ongoing training to designated employees and monitor their training status;
5. have mechanisms in place to identify and remedy recurring or systemic issues and track, identify and address root causes; and
6. provide redress and/or reimbursement for financial and non-financial complaints to all affected consumers.

Banks will also be expected to regularly test the effectiveness and update their complaint-handling and training policies.

2. Timeliness – policies and procedures should require that complaints be handled promptly and without unnecessary delays.

To achieve this outcome, Banks will need to ensure that their policies set out a timeframe of no more than 14 days for an unresolved complaint to be referred to a designated employee, regardless of the channel through which the complaint is received. All complaints referred to a designated employee must be reported to the FCAC.

3. Accessibility – policies and procedures are expected to be easy to find, navigate and understand by consumers.

Complaint-handling policies and procedures should ensure that all employees who deal with complaints can assist consumers in navigating the complaints process, including referrals to the external complaint body. They should also ensure that consumers be provided with plain language information related to the complaints process and their right to submit their complaint to the external complaints body, including the process involved to do so. 

Banks will be required to demonstrate that they have taken appropriate steps to provide consumers with the information and documentation necessary for them to file a complaint and navigate the process. The Guideline also sets out the complaints-related information that will have to posted on a Bank’s website.

FCAC expects Banks to acknowledge consumer complaints in writing without delay, regardless of the channel through which they are received, subject however to the manner in which they were received. It also expects Banks to track complaints and provide timely updates to consumers upon request. Once complaints are resolved or closed, Banks are expected to provide a substantive written response (including, date complaint received, Bank’s final offer, final decision, consumers’ right to escalate, etc.) to consumers without delay.

Finally, the Guideline requires Banks to maintain a record of all complaints received, including any in which the consumer is not named and any received by a third party, and report them to the FCAC in accordance with its Mandatory Reporting Guide .

All interested parties are invited to submit their comments to the FCAC by December 11, 2021.

Guideline on Appropriate Products and Services

This Guideline sets out five key principles Banks will be expected to consider when developing and implementing their policies and procedures on product appropriateness, having regard to consumers’ circumstances, including their financial needs. Bank policies and procedures will therefore need to address the following principles:

1. Know your consumer (KYC) - a Bank should collect and assess the information it needs to understand consumers’ circumstances, including their financial needs, before it offers or sell products or services to them.

Bank policies and procedures will have to ensure that Banks collect and record the information they need about the circumstances of the consumer to whom they are offering products or services to allow them to assess whether they are appropriate for that consumer. The FCAC recognizes that the information a Bank may need to collect and verify will vary based on a consumer’s circumstances, including their financial needs.

The policies should cover the collection, verification and updating of information and should outline the process to be followed if the information is found to be unreliable, incomplete, inaccurate or outdated. They should also set out the process involved when consumers refuse or are unable to provide the information needed by a Bank.

2. Know your product

Policies and procedures related to product appropriateness should cover the assessment, review and approval process applicable to the entire product life cycle (design through to sale). The assessment should include product features, risks, charges and consumer benefits; distribution channel considerations; and consumer-facing materials (disclosure and marketing) and be applicable to:

1. All products and services, including any changes thereto, developed by the Bank regardless of whether they are sold by the Bank or through a third party;
2. Any third party products or services, including any changes thereto, offered or sold by or through the Bank.

Policies and procedures should also prescribe initial and ongoing training for those individuals involved in the offer or sale of a Bank product or service to ensure that they have the necessary skills, knowledge and expertise to assess the appropriateness of products and services for consumers, based on their individual circumstances. Bank training policies should also require the monitoring of training program completion by the individuals involved in the offer or sale of Bank products and services. Training programs should also be reviewed and updated regularly.

3. Assessing Appropriateness

Bank policies and procedures should provide for product and service appropriateness assessments even when the products or services are requested directly by consumers. In addition, they should provide the methods that should be used to demonstrate that assessments have been duly performed as well as the resulting outcomes. Provision should also be made for situations where consumers would like to purchase products or services that have been assess as not being appropriate for them or in the event assessments cannot be performed.

4. Informing consumers

Bank policies should provide that consumers are to be informed when Banks have conducted their assessment of a product or services that is not appropriate for them of if an assessment cannot be conducted. This information should be provided in plain language and presented in a manner that considers the distribution channel, the nature of the product or service and any other relevant factors.

5. Aligning remuneration

A Bank’s compensation program should be reviewed regularly to ensure it does not conflict with its product appropriateness obligations. Furthermore, remuneration for sales individuals should be based on factors that align with Bank policies and procedures related to product appropriateness and not interfere with them. Remuneration includes monetary and non-monetary benefits.

The consultation period to submit comments to the FCAC runs until January 6, 2022. A third consultation related to the implementation of whistleblowing programs is currently being planned by the FCAC .

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