Changes to Complaints Rules Proposed

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complain rulesThe Financial Conduct Authority (FCA) has announced that it will commence a consultation before the end of 2014 regarding changes to its complaints handling rules.

According to compliance consultant Scott Robert, this follows the publication of the regulator’s latest thematic review into firms’ complaint handling practices. The review covered 15 large firms – seven banks, two building societies, three general insurers and three life insurers – and looked at their complaint handling practices and procedures for products other than payment protection insurance (which has been the subject of several thematic reviews in its own right). The firms chosen were collectively responsible for 79% of the complaints made about banking in the period July to December 2012.

The review identified that in many firms, senior management is taking a greater interest in the issue of complaints than was previously the case. However, areas of greater concern identified by the review included:

  • Firms not considering the impact on customers when designing complaints procedures. One example in the review is that of firms sending complicated, legalistic final response letters when completing their investigations
  • Concerns over whether all staff within these firms understand exactly what the FCA definition of a complaint is. Some firms were reportedly invoking their formal procedures for all expressions of dissatisfaction, even if material distress or inconvenience had not resulted. Some were using their formal complaints process for minor complaints about service standards.
  • Discrepancies in how firms assess the compensation due, particularly regarding payments for distress and inconvenience
  • Weaknesses in root cause analysis
  • Weaknesses in the management information collected regarding complaints
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FCA-regulated firms of all types and sizes need to consider that there are five stages to the complaints process, which are:

  • Identifying that a complaint has been made
  • Recording the complaint
  • Reporting the complaint within the firm in the correct way
  • Providing appropriate compensation, if applicable. The amount of compensation offered should be sufficient to put the customer back in the position they would have been in had the firm not acted incorrectly. An additional payment for distress and inconvenience may also be appropriate
  • Carrying out root cause analysis – assessing why the complaint occurred, and what action might be necessary within the firm to reduce the likelihood of future complaints. These actions might include: additional staff training, disciplinary action or changes to practices and procedures

After the review, the FCA convened a ‘working group’ to discuss the results, consisting of the 15 firms and five trade associations. Views were also sought from consumer groups and from independent complaints adjudicator the Financial Ombudsman Service.

The working group made a number of recommendations, which may be the subject of the forthcoming consultation. These included:

  • Reviewing the definition of a complaint, particularly with regard to the rather subjective ‘material distress or material inconvenience’ part of the existing definition
  • Requiring firms to report all complaints to the FCA, including those which are settled by the close of the following business day
  • Extending the ‘close of next business day’ rule to seven days, thus giving firms one week to try and resolve the matter amicably
  • Requiring complaint telephone calls from customers, including those from mobiles, to be charged at no more than a basic rate phone call
  • Changing the way the FCA reports complaints
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Clive Adamson, director of supervision at the FCA, said:

“[The firms and the FCA] have identified improvements that should be made and firms will act on these findings. I hope those firms who weren’t part of the review will consider the recommendations and take appropriate steps to deliver consistent outcomes for consumers.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.