Having studied how these firms treated their customers and handled complaints the regulator highlighted several key areas for improvement – including operations not being run “in customers’ best interests”.
It warned that firms were not recording complaints correctly which prevented identifying the root cause of issues, that tick-box compliance was leading to inflexible handling, and that they were not applying lessons from Financial Ombudsman Service (FOS) decisions.
Poor complaints data
Although the FCA found firms had a positive attitude towards complaints analysis, it was scathing in how they handled complaints data – including inefficient reporting to boards.
It said that “complaints aren’t identified and recorded consistently. This includes not always recording the root cause of complaints.”
“Senior management and board reports often only contain operational data and not details on symptoms of complaints, root cause and preventive actions.
“Also, there are no details on customer experiences and outcomes, and quality of complaints handling,” it added.
May not be in customers’ interests
The regulator also identified “tick-box compliance resulting in inflexible complaints handling”.
It found that some firms only looked to follow the regulator’s rules with a tick-box compliance approach and they did not fully appreciate the effect on customers.
“This approach can drive complaints operations in ways which may not be in customers’ best interests,” the regulator warned.
“In some firms there is an over reliance on policies and processes. The resulting tick-box approach can limit staff’s ability to exercise judgement and put customers’ interest first leading to potential harm to customers.”
It then concluded that firms could handle complaints better with some firms not “effectively applying lessons learned from determinations by the Financial Ombudsman Service”.
Key lessons
Overall the regulator raised eight key messages which non-deposit taking lenders and third-party administrators should take action on.
These were:
- Ensure the management information they collect and analyse is accurate and relevant to its operations as it is an important tool for firms. It helps to measure whether customers are treated fairly and identify ways to improve customer outcomes.
- Have robust root cause analysis capabilities to identify and remedy any recurring systemic problems.
- Have appropriate governance and processes in place to make sure root cause analysis provides strategic purpose, accurately identifying recurring or systemic problems.
- Establish and maintain effective and transparent procedures for the reasonable and prompt handling of complaints. Firms should consider, for each complaint, whether the customers’ outcome and experience shows the firm has put the customers interests first.
- Make sure they assess complaints fairly, consistently and promptly.
- Record complaints accurately. Weaknesses and failures in recording complaints may result in poor customer experiences and outcomes, and affect firms’ ability to put things right.
- Make sure their internal systems and controls allow staff to identify and record complaints correctly.
- Have processes in place to make sure the data in its FCA annual or biannual complaints return is accurate.
