Despite some industry reservations regarding the focus of TCF and how it would be reviewed and implemented, the regulator certainly worked overtime in terms of ongoing announcements and assessments.
And then it appeared to go somewhat quiet on the TCF front.
With the myriad of existing and new responsibilities the regulator had to attend to during, and following, the credit crunch and recession, many believed that TCF as a focus would be firmly placed on the back-burner.
Indeed, questions seemed to be raised at the very highest level about what exactly the FSA had been trying to achieve with its focus on TCF and whether it had achieved those aims with the considerable resource and investment it had placed on it.
Some thought TCF would go quietly into the night. However, that may have been wishful thinking on their part and, given that TCF is a fundamental principle of the FSA’s, it was perhaps naïve to think the regulator would merely jettison such an important part of its constitution.
So, TCF lives, walks, talks and breathes and, as a business that is currently being reviewed on whether TCF is embedded within it, we know only too well that the initiative is still a considerable focus for the FSA.
This has been clearly evidenced by the recent news surrounding TCF practices within lenders and irresponsible lending actions which are currently under investigation.
It is likely that the recent fine issued to Deutsche Bank will not be the last when it comes to a consideration of whether lenders treat their customers fairly and therefore advisory firms must also steel themselves for continuous review as well.
Advisory practices remain firmly on the TCF radar and ensuring their ability to prove competency in this area is vital.
As with most regulatory responsibilities, the big focus for the FSA is on the ability of firms to evidence they are carrying them out.
‘If it’s not written down, it doesn’t exist’ is a constant refrain heard from compliance departments, albeit with the caveat that paper trails are not always necessary if you have a technological system which automatically delivers in this regard.
This is a major issue for many firms; they simply do not have the necessary hardware or software capability to evidence the trail of ongoing TCF.
Smaller firms in particular will suffer because of a lack of resource and/or investment in such systems. The benefits, for example, of a system that captures all the necessary management information (MI) automatically cannot be under-estimated and any firm facing an FSA TCF review will be in great shape if they are able to draw upon such a system.
Evidencing TCF is crucial and the regulator is actively looking for specific examples of good practice amongst individual firms. Of course, it is also looking for bad practice examples which many practices may be hoping to hide.
That said, TCF is not rocket science, but it does require ongoing assessment and, rather importantly, a gap analysis in order to ascertain where the business could be doing better.
Management must be at the heart of driving TCF within any firm, which means a commitment to delivering on the six consumer outcomes the FSA wants to see plus ensuring all members of staff buy in to the initiative and the process.
TCF is certainly not viewed as a nice to have option or an initiative which should only take up a limited amount of time each year. The FSA will be keen to view an ongoing commitment to it which delivers the necessary outcomes week in, week out.
For example, it will be looking for evidence that staff recommendations regarding TCF conduct are taken on board and fed into the sales and advice process. It will also be interested to see how complaints are handled and whether their root causes are identified and the findings fed into the training practices of the firm.
Essentially, having the look of a firm that takes TCF seriously is never enough.
The FSA believes firms have had plenty of time to develop and implement their TCF strategies; it now wishes to see the positive results of such action and the evidence to back this up. This is not a regulator that will be in hand-holding mode when it comes to TCF indiscretions. As evidenced by the fines for lenders, it is actively punishing those whose standards are not up to scratch.
TCF remains high on the FSA’s agenda and therefore regulated firms should do likewise.
For those firms that are not where they wish to be with TCF, it is never too late to join an organisation that can help them get quickly up to speed and supply all the necessary know-how and technology to ensure they fulfill their responsibilities in this particularly important regulatory area.
The FSA has not given up on TCF and neither should you.
Richard Adams is managing director of Stonebridge Group
