March 2019
By Steven Howard, Head of Mortgage and Lending Intermediaries Compliance Services - The SimplyBiz Group.
Eighteen months ago the Financial Conduct Authority (FCA) issued one of its “Dear CEO” letters in connection with consumer credit firm’s complaint handling procedures. This followed on from a review looking at how consumer credit firms approach and deal with customer complaints which highlighted a number of areas of concern including:-
Falling into the four broad categories of process, quality, policy and controls, processes are the simplest fix, as firms should ensure that they publish the required information about their complaints handling procedures, and Financial Ombudsman Service, on both their website and in any complaint letters. The call from the FCA was, and still is, for firms to review their processes for recording and reporting accurate complaints data, as it found evidence that some of the data received from firms was inaccurate.
Under complaint handling, the FCA would expect firms to explain the outcome of a complaint along with any reasons for rejection. The review not only uncovered examples of unclear explanations, but also examples where amazingly it was not even clear if the original complaint had been upheld or not.
Firms must get this right and should also take pre-emptive action by carefully considering how they ensure communications are fair, clear and not misleading – in both the wording of communications and the way that text is presented.
Some of the most concerning areas of non-compliance were those that suggested major errors in a firm’s complaints policy. The FCA found that nearly one fifth of the firms reviewed were operating a ‘two-stage’ process, where complaints were only escalated if customers were dissatisfied with the initial outcome. This type of procedure is no longer permitted.
It also found ‘surprisingly high levels’ of ex-gratia payments and whilst it noted that firms are free to make these types of payments, the FCA does not expect them to be used as a substitute for investigating complaints properly. It is essential that staff clearly understand when this type of ex-gratia payments should be made and why.
Finally, the FCA requires firms to put in place appropriate management controls to identify and remedy any recurring problems that it may uncover. It found that a large proportion of firms had failed to carry out a root cause analysis of the complaints and had subsequently failed to act on any results. It is vitally important that firms get this right, not only to ensure that they are meeting regulatory expectations, but to make improvements to their business. By identifying and correcting any recurring problems, firms have an opportunity to improve customer outcomes and to reduce compensation costs from any future complaints.
Members taking compliance services will be pleased to hear that there is a suite of guidance and template documents available for use under the Complaints Section of our Compliance Hub, which includes template documents for use when investigating customer complaints. Membership benefits also provide access to reading and testing activity in order to train and improve knowledge around complaints handling procedures and expectations within your firm.
For further information, contact the Membership team on 01484 443424.