An FCA warning: How not to handle complaints
Enforcement action will be taken against firms who are seriously failing to comply with the Financial Conduct Authority’s (FCA) complaints policy.
This was the warning from the regulator last month, in a ‘Dear CEO’ letter that revealed it had undertaken complaints handling research, where it reviewed firms’ data, final response letters and website information. The regulator said it found “concerning issues”.
The letter stated: “Resolving complaints effectively is an important way for firms to identify and correct mistakes in the treatment of customers, and an important means to identify and address common or systemic issues that give rise to complaints.”
Although the regulator said it found some good practice of its Dispute Resolution Rules (DISP), which have been in force since 2007, it found some generally poor practices of non-compliance too. The main concerns about poor handling of consumer complaints were:
- Failure to provide to customers the required information about the Financial Ombudsman Service – this included failing to provide details of the complainant’s right to refer to the ombudsman if they remain dissatisfied;
- Failure to provide a clear explanation, to the complainant, of the outcome of the complaint and why this outcome had been reached;
- A lack of management controls in place to analyse and remedy any root causes of complaints or systemic problems.
It also found evidence to suggest firms have been failing to record and report accurate complaints data – even though the FCA has required all consumer credit firms to report all complaints since June 30 2016.
The research also found firms are operating a two-stage complaints process where there is an internal escalation if a customer is dissatisfied with the outcome of their complaint.
The FCA no longer permits two-stage complaints procedures and has not since 2012. It said this is because these processes have been shown to deter customers from pursuing their complaint.
As the letter concludes, it lays out expectations of firms, stating they must review how they identify, record, and deal with complaints as well as how this is communicated to customers.
The letter, written by Jonathan Davidson, director of supervision – retail and authorisation at the FCA, ends with the note: “Where we find serious failings we shall consider referring such cases to our enforcement division for formal action to be taken.”
The overall message throughout the letter was emphasised by Philip Salter, director of retail lending supervision at the FCA, as he spoke at the Credit Services Association’s annual conference in September. He indicated that an issue the regulator had discovered was where the root cause of an individual complaint, once resolved, had not been fed back into a wider discussion internally about potential other complaints caused by the same problem.
In other words, the firm had not investigated whether a root cause showed a wider, systemic issue.