Our Approaches

How Our Approaches can help

Approaches are guides to help consumers and firms to better understand how we reach our decisions on complaints about products, services or issues. This includes how we consider relevant legal principles, regulations and industry codes of conduct or best practices that may apply.

Approaches are not intended to set a precedent for future cases. No approach document can cover all the key issues related to a dispute as each complaint we investigate is considered on the specific merits of that case. But they may provide some insights into what we consider when we look into a dispute.

Non-financial loss

OBSI's Approach to Non-Financial Loss

While recommendations to compensate "loss, damage or harm" are part of OBSI's mandate, we often get questions about our approach to what is commonly called non-financial loss, which doesn't involve monetary loss for a client.

These are the cases where we believe the loss or damage for the client goes beyond direct financial loss because of the distress or inconvenience involved. It may also involve loss of reputation, damage to credit ratings or loss of privacy.

While every file is unique, and we consider what is fair in all the circumstances, it's important for all parties to know that we look at cases and consider recommendations consistently.

What is a non-financial loss?

A non-financial loss does not have a direct monetary value. In OBSI's dispute resolution process, a common example is the distress or inconvenience caused by a firm's maladministration or error.

Does OBSI recommend compensation for non-financial loss?

For the most part, our recommendations for compensation are designed to put clients back where they should have been if there hadn't been an error or poor advice. However, occasionally we have a case where we believe the loss suffered goes beyond direct financial loss because of the distress and inconvenience, or other non-financial loss, involved. In those cases, we will recommend compensation to recognize that loss as well.

In some cases, we may also recommend compensation even when there is not a direct financial loss.

In addition to distress and inconvenience, are there other non-financial losses OBSI will look at?

OBSI will also look at loss of reputation, damage to credit ratings and loss of privacy. In some cases of privacy breaches we may recommend that the complaint is better handled by the appropriate privacy commission.

When does OBSI not recommend compensation for non-financial loss?

All clients experience some inconvenience when dealing with a dispute with their financial institution. OBSI will not recommend compensation for the distress or inconvenience that may be expected as a normal part of doing business or for the time and effort required to make a complaint, unless it exceeds what we believe to be reasonable under the circumstances.

We do not look at health issues, such as stress or other medical conditions, when assessing non-financial losses. Nor do we consider claims for pain and suffering.

Our recommendations to compensate for non-financial loss should not be viewed as punishments. Where warranted, that is the role of a regulator or court. Similarly, we do not levy fines or award punitive damages.

Non-financial loss does not include "indirect" financial losses. If, for example, a client takes time off work to resolve a complaint and loses income as a result, that may be considered in the calculation of financial loss depending on the circumstances.

How often, and how much, does OBSI recommend for non-financial loss?

We have been making recommendations for non-financial loss since our office was formed in 1996. Except in extreme cases, the recommended compensation ranges from $100 to $5,000, but in most cases is less than $1,000.

Clients who consider their non-financial losses to be significant, or who want damages in addition to reimbursement, may want to pursue their complaint through other avenues such as the courts.

Do recommendations for non-financial loss always mean a financial award?

No. OBSI may recommend that firms compensate clients in ways that are not monetary, such as a letter of apology, restoring a product or service, correcting a credit bureau record or explanatory letters to a client's creditors.
What do we consider in determining the amount of recommended compensation?
While there is no exact measuring stick for assessing fair compensation for non-financial loss, we will consider the following as we make our recommendations:

Was the non-financial loss prolonged?
Was the non-financial loss significant?
Has the client been through a period of unnecessary financial hardship?
Was the complaint process itself unnecessarily difficult or prolonged?
Did the client contribute to their non-financial loss?

Related case studies

How OBSI may compensate for non-financial harm

Relationship-ended

OBSI's approach to when a firm ends its relationship with the client

Relationship-ended: what does it mean?

A firm may choose to end its business relationship with a client. This means that the client's account must be closed, and their money is either sent to them or to another financial institution. We refer to this as a relationship-ended situation.

When can a firm end its relationship with a client?

The client account or credit agreement outlines a firm's right to close the client's accounts. A firm can end its relationship with a client for many reasons. The most common reasons being:

The client did not follow the terms of the credit or account agreement or was dishonest with the bank. For example, trying to avoid the bank's rules by making multiple small cash deposits instead of one larger one.
The client engaged in inappropriate or threatening behaviour. For example, threatening the safety of a bank employee.
The firm has concerns that the activity in the account may not be legal and cannot get information from the client to ensure the activity is permitted. For example, a firm may suspect that the client's account is being used for fraud, money laundering, tax evasion or ties to terrorism. If this is the case, the firm is required to end its relationship with the client under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

The process of ending the firm-customer relationship

Although the firm may choose to close a client's account with or without notice, firms will generally:

provide clients with written notice of their intention to end the business relationship.
allow clients 30 days to close their accounts.

Firms will generally notify their client of their intentions to end their relationship. The firm may mail a written notice to the address they have on file.

If the firm suspects illegal activity and there is a risk that the activity could continue, the firm can freeze or close the account without notice.

Firms have the choice to give a client more time to close their accounts if the client will have difficulty making other arrangements within the time allowed.

In some circumstances, firms do not have to give clients reasons for choosing to end the relationship.

Problems that commonly arise with relationship-ended cases

Some common misunderstandings and problems that arise when firms end their relationships with clients include:

clients are offended and want reasons for the firm's decision.
clients have not read the notices sent to them in time to make appropriate arrangements.
registered accounts are closed, leading to tax consequences if appropriate arrangements are not or cannot be made in time.

Our approach

Regarding the firm's actions, we consider:

The terms of the account agreement.
Whether the firm followed the law and its policies and procedures to close the account. For example, the firm does not have to prove illegal or fraudulent activity, but it must show that there was a reasonable basis to suspect such activity.
Whether the firm's process was fair and free of bias.
Whether the firm provided reasonable notice in the circumstances of the case. For example:
- 30 days might be reasonable for a client to open a new bank account but may not be enough time to apply for a new revolving business credit line.

We will not second guess a firm's risk decision or commercial judgement (i.e. its business decisions). This includes a firm's decision to end its business relationship with a client.

We will ask the firm for details about why they ended the relationship with the client. However, we cannot share the reasons for the firm's decision with the client unless the firm allows us to.

Regarding the client's actions, we consider:

Did the client fail to follow the terms of their account or credit agreement?
Did the client give the firm a reasonable explanation for any activities in question?
If there were issues that would cause the client to need additional time to close the account, did the client promptly notify the firm of those reasons and request additional time?

Our recommendations

If we find the firm did not follow their process or acted with bias or unreasonably, we may make a recommendation for compensation for non-financial loss or another remedy. If a firm followed their processes properly and acted fairly we would not recommend compensation.

Cheques

Common problems we see in cases involving cheques

Cheques are not as simple as many Canadians think! At OBSI, we find that people often misunderstand the rules relating to cheques and this can cause them to lose money, fall victim to frauds, and have problems with their financial institution.

What is a cheque?

A cheque is a written promise from one person to pay another. A cheque is a document that instructs the bank to pay a certain amount of money from one account to another.

A cheque is NOT a guarantee you will receive the promised money. For example, the cheque must be properly written and the cheque-writer must have sufficient money in their account to pay the amount promised.

How a cheque is processed

A cheque must be processed or "cleared" by the bank before the money promised by the cheque belongs to you. Even if the money from the cheque has been deposited into your account you may not be entitled to keep it if the cheque doesn't clear.

A bank will clear a cheque if it is properly written, there is enough money in the cheque-writer's account, and if there are no other problems with the cheque (like fraud, duplication, or a stop payment). A depositor cannot keep money promised by a cheque if the cheque does not clear. For example, if you deposit a cheque into your account and it is fraudulent, or there is not enough money in the account of the person who wrote the cheque to you, the bank will reverse the deposit and take the money back.

Many people think that cheques can be cleared quickly - like in 3 or 5 days. Banks have much longer than that - up to 90 days or even longer - to reverse a cheque deposit if it turns out that the cheque-writer does not have the money they promised or that there are other problems with the cheque.

Common problems that can arise with cheques

We see some common misunderstandings and problems related to the use of cheques. These include:

Various types of cheque fraud that take advantage of the delay between the time a cheque is deposited and the time it clears. For example:
- fraudsters "accidentally" send a cheque for too much money to a victim and then trick the victim into sending back the overpayment. After the victim has sent the fraudster money, the problem with the original cheque is discovered and the original deposit is reversed, and the victim has lost the overpayment amount.

Early deposits - when a postdated cheque is deposited earlier than expected.
Late deposits - when a cheque is deposited much later than expected.

Duplicate deposits - when a cheque is accidentally or intentionally deposited more than once. For example, by electronic deposit and then paper deposit, or multiple times by electronic deposit.
Stop payment orders on cheques not working.
Forgery - the altering of words or numbers on a legitimate cheque for dishonest purposes.

Holds on cheques

Banks have the right to put a hold on cheques deposited into your account. A "hold" prevents you from accessing the money promised by the cheque for a set period of time. Banks usually determine the hold period based on how the cheque was deposited and the amount it was for. Generally, the hold period won't exceed four to five days for cheques less than $1,500 and seven to eight days for cheques over $1,500. 

When a bank confirms the cheque is valid and there is sufficient money available in the cheque-writer's account, the bank can then determine whether to continue or lift a hold.

Even when a hold is placed, banks must generally make the first $100 available to consumers for withdrawal. It is important to remember, though, that this $100 can still be taken back if the cheque does not clear. Also, the end of a hold does not mean the cheque has cleared - the cheque could still be rejected later. If the cheque is rejected later, the bank will take the money back from the depositor's account.

To learn more about cheques and hold periods, please visit the link below: 

https://www.canada.ca/en/financial-consumer-agency/services/rights-responsibilities/rights-banking/cheque-hold-access-funds.html 

When we review disputes about cheques, we consider:

Consumers are responsible for any cheques deposited into their account. They should act reasonably and use common sense when receiving payments by cheque and depositing cheques. For example, they should:
- only deposit cheques from trusted sources
- be alert to signs of fraud and exercise reasonable caution
- take reasonable steps to protect their cheques, including:
  - keeping their cheques and banking information in a safe place
  - safely destroying any documents/cheques/statements that may contain personal information
  - regularly checking their account online and reviewing their monthly account statements
- review their bank statements regularly and report problems with deposits or withdrawals quickly.

Banks are responsible for following the payments rules, honouring their agreements, and treating their customers fairly. For example:
- they should act to inform and protect their customers where it is reasonable and possible to do so, though their obligations are limited. For example, if signs of fraud come to the attention of the bank they should act reasonably to inform the consumer of their concerns.
- if the dispute is about a hold, we will consider whether the bank had a valid reason for the hold and if they did it in a fair manner, for example we will consider:
  - whether the bank had reason to suspect the cheque was fraudulent
  - whether there were sufficient funds available to cover the amount the cheque
  - whether the bank followed the appropriate rules for placing a hold.

Canada's payments rules impose certain timelines that banks have to follow when dealing with one another and reversing payments.

Canada has laws that protect the rights of people who have received cheques - especially if duplicate cheques have been created and deposited.

Related case studies

Small Business Employee Forged Cheques

Safekeeping Cheques

Credit card chargebacks

OBSI's approach to credit card chargeback cases

What is a chargeback?

A chargeback is the reversal of a credit card charge. There are several reasons why consumers might request a chargeback, including:

they did not authorize the charge
the merchant did not deliver the product or service, or
the product or service received was not as described or what they expected

The chargeback process

Most credit card agreements require consumers to first try to resolve issues directly with the merchant. If that doesn't work, consumers can request a chargeback through their credit card issuer, which is often a bank. The bank will determine if the consumer's chargeback request has merit. The bank then submits the chargeback request to the credit card network (for example, VISA or Mastercard) and follows the credit card network's chargeback process. The credit card network will in turn involve the merchant's bank in the process.

Our approach

The chargeback request process is run by the credit card networks. They ultimately decide the outcome of chargeback requests. The credit card networks are not OBSI participating firms. Only the banks, which are the credit card issuers, are OBSI participating firms. Our focus in chargeback complaints is how the bank and the consumer conducted themselves during the chargeback process.

Regarding the credit card issuer's actions, we consider:

Did the bank provide the consumer with clear guidance about the chargeback process?
- This includes any applicable deadlines and any information the consumer needed to provide to support their request
Did the bank take reasonable steps to submit and process the consumer's chargeback request in accordance with the credit card network's chargeback rules?
- This will include determining the eligibility of chargeback request and reviewing the required information to support the request, appropriately rebutting the merchant's response and, if necessary, requesting the credit card network settle the matter
Did the bank follow its internal policies and procedures for submitting and processing chargebacks?
Did the bank follow any applicable consumer protection legislation?

Regarding the consumer's actions, we consider:

Did the consumer first try to resolve the issue with the merchant?
- Typically, credit card agreements require consumers to first try to resolve their dispute directly with the merchant
Did the consumer report the disputed transaction to the bank within the required timeframe?
- Consumers need to report any disputed transactions to their bank within a specific period
Did the consumer provide the bank with appropriate evidence and information regarding the disputed transaction in a timely manner?
- For example, proof of purchase or the service agreement for the transaction disputed
Did the consumer follow other reasonable requests/instructions from the bank?
- For example, did the consumer provide additional information to support the chargeback request?

Our recommendations

After considering the actions of the consumer and the bank, we determine if it would be fair in the circumstances to recommend the bank compensate the consumer. We may not recommend any compensation. We may recommend the bank fully compensate the consumer for their loss, or we may recommend that the parties share responsibility for any loss.

Related case studies

Chargebacks