FSA/PN/074/2010
28 Apr 2010
The Financial Services Authority (FSA) is taking tough action after finding weaknesses in five banks handling of customer complaints.
As a result of the review, five banks are undertaking major changes to the way they deal with complaints and two of the five banks have been referred to enforcement for further investigation.
The review looked at several banking groups responsible for over 70% of the complaints firms receive and report to the FSA and over 60% of those resolved by the Financial Ombudsman Service (FOS).
It found poor standards of complaint handling within most of the banks assessed, including:
- A lack of senior management engagement and accountability for the delivery of fair complaint handling;
- Poorly designed staff incentive schemes that made branch staff reluctant to pay redress to customers, even in situations where the bank was at fault;
- Poor quality complaint handling by staff in branches and general call-centres leading to inadequate investigations, poor decision making as to the outcome of the complaint and unsatisfactory correspondence with customers;
- Complaint handling procedures that led to staff issuing multiple, repetitive responses to customers, forcing them to restate their complaint a number of times in the face of ongoing negative responses from the bank;
- The failure of banks to learn from previous complaints and to make changes to prevent similar complaints arising in the future.
Importantly, the FSA did find examples of good and compliant practices in parts of some of the banking groups assessed. This demonstrates it is possible for banks to handle high volumes of complaints and deliver fair outcomes for consumers.
Dan Waters, the FSA’s director of conduct risk, said:
“A culture of fair complaint handling is an important indicator of whether a firm is committed to treating its customers fairly. It is vital that customers know that if something goes wrong, their complaint will be deal with in a reasonable way and that they will get a fair outcome.
“While we found some good practice, there is clearly evidence of unacceptable standards of complaints handling in banks. Delivering change in this area is a major priority and we are determined to use all the tools available to us to ensure that banks comply with our rules.”
To assist all firms in meeting its requirements, the FSA has published a complaints handling file review template, which firms may wish to use to help them assess if their complaint handling is achieving fair outcomes for customers.
The FSA is also reviewing whether it needs to make changes to its existing rules on complaint handling and will be publishing its proposals in the third quarter of this year.
Notes for editors
- The review of complaint handling in banking groups can be found on the FSA website.
- This review follows concerns about the quality of complaint handling in banking groups highlighted by past work on PPI and bank overdraft charges and our wider supervisory work. The Financial Ombudsman Service has also identified concerns from the cases it handles. Poor complaint handling has also been identified as a key conduct risk in the Financial Risk Outlook (FRO) 2009 and 2010.
- The FSA has undertaken a programme of work to drive improvement in the quality of firm’s complaint handling. The FSA’s work on transparency and discussion paper with the OFT and FOS.
- The degree of change necessary in some banks requires sustained and rigorous effort from senior management to deliver improvement and it is important to note that actions taken by banks may not quickly result in a decrease in complaint volumes or the numbers of complaints referred to the FOS.
- The findings in this report are not formal determinations of breaches of FSA requirements. The purpose of this report is to give an illustration of the types of issues we have identified. Any formal determination against specific firms will follow the FSA's usual decision-making processes.
- This approach builds on the FSA’s TCF work and is an example of how it is using intensive supervision to deliver its consumer protection strategy – testing whether firms are delivering fair outcomes and holding them to account where the FSA finds poor practice.
- The FSA regulates the financial services industry and has five objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
