Ombudsman heard 28 per cent more bank customer complaints in 2017

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Banking-related complaints handled by an industry ombudsman rose 28 per cent in 2017, reaching the highest level in five years as disputes over credit cards nearly doubled.

The Ombudsman for Banking Services and Investments (OBSI) opened 370 banking-related cases last year, mostly related to credit cards, mortgages and personal accounts, compared with 290 a year earlier. Investment-related cases remained roughly flat at 351.

All told, the 721 cases OBSI opened marked a 13-per-cent increase from 2016, which the organization attributed partly to "increased consumer awareness" in its annual report. OBSI is an industry-funded body that resolves disputes between customers and their banks and investment firms.

Banks came under added scrutiny over their sales practices in 2017 after media reports revealed allegations of aggressive selling and, in some cases, misconduct by bank staff. The Financial Consumer Agency of Canada and Canada's banking regulator, the Office of the Superintendent of Financial Institutions, are conducting reviews of bank sales practices and are expected to publish a report early this year. So far, no evidence of widespread misbehaviour has emerged.

The largest share of complaints about credit cards in 2017 were over chargebacks – reversed charges on customer accounts – followed by fraud and unauthorized transactions. Mortgages were also a common source of complaints, with consumers disputing penalties and incomplete or incorrect information.

Customers who won banking-related cases with OBSI received an average of $2,089 in compensation, for a total of more than $165,000 for the year.

Investors who turned to OBSI complained most often about the suitability of investments, as well as fee disclosure for mutual funds and other products. Successful investment complaints won an average of $16,180 in compensation, amounting to more than $2.4-million returned to customers. Yet late last year, three investment industry regulators issued a joint statement raising concerns about firms' compliance with OBSI directives, which aren't binding.

The OBSI figures do not include complaints about Canada's two largest banks, Royal Bank of Canada and Toronto-Dominion Bank, which opted out and instead use ADR Chambers, a third-party firm, to resolve customer complaints. ADR's banking ombuds office opened 275 formal complaints in 2017, most commonly over poor customer service or credit card and debit card fraud – an increase of 22 per cent from 2016, according to its annual report. Of those complaints, 157 related to TD and the remaining 118 to RBC.

Among financial institutions OBSI oversees, the largest number of banking complaints were lodged against Bank of Nova Scotia, which had 128 cases opened but only 23 decided in the consumer's favour. Scotiabank's capital markets arm also topped the list of investment-related complaints, with 36 cases opened, of which 17 went the consumer's way.