We have published a report containing the results from our review of complaint handling in banking groups. This report sets out some of our existing complaint-handling requirements for firms and includes examples of good and poor practice demonstrated by the banks we assessed. The findings are relevant to all firms who handle complaints.
Background
Ensuring that firms treat customers fairly is at the heart of our consumer protection agenda. Central to this is the importance of firms embedding a culture that is committed to the fair treatment of their customers.The quality of a firm's complaint handling is an important aspect of this, revealing the extent to which cultural drivers such as senior management engagement, decision-making and staff reward structures are delivering fair outcomes for customers. Carried out well, complaint handling represents a valuable opportunity for firms to rebuild and enhance their relationships with their customers when something has gone wrong, and to use the information gathered to make changes that deliver fair outcomes for their wider customer base (for example, by changing their product design or sales processes).
Our review of complaint handling in banking groups is part of our wider programme of work to drive improvement in the quality of firms’ complaint handling.
Our work to increase transparency is an example of this:
- In September 2009 we published aggregate complaints data covering all firms for the first time (the Financial Ombudsman Service (FOS) also started publishing firm-specific data at the same time).
- In April 2010 new rules came into place requiring firms to publish their own complaints data every six months, with firms having to publish their first complaints data summaries by the end of August 2010.
- We published consolidated firm-specific data at the end of September 2010 to enable firms' performance to be compared across their peer group.
We also published a joint Discussion Paper with the Office of Fair Trading (OFT) and the FOS on consumer complaints in March 2010. This paper explores how we might change the way we work with the FOS and the OFT to take an increasingly forward-looking approach to emerging risks and to provide firms and consumers with greater certainty and transparency in the handling of widespread issues.
Results
Our review found evidence of poor complaint-handling standards within most of the banks we assessed. This resulted mainly from weaknesses in banks' culture, particularly their governance arrangements, policies and procedures and was reflected in our file review results.
Importantly the fact that we found good and compliant practices in parts of some banking groups demonstrates that it is possible for banks to handle high volumes of complaints and deliver consistently fair outcomes for complainants.
These results indicate that the banks included in our review need to take action to improve the standard of their complaint handling and ensure they treat complainants fairly. From our review we have summarised the areas that have the most significant impact on the quality of banks' complaint handling:
- Culture: Most of the banks assessed had not embedded a culture that focused on delivering fair outcomes for complainants. There was a direct correlation between banks that had a poor complaint-handling culture and banks assessed as delivering poor outcomes for complainants. Where the culture was poor, the key drivers were a lack of senior management engagement with complaint handling, poorly conceived procedures and controls, inadequate training and competence arrangements, and poorly conceived remuneration policies for complaint-handling staff.
- Root cause analysis: The extent and quality of root cause analysis undertaken varied between banks and this affected the extent to which they were able to identify recurrent or systemic problems and take appropriate action. Banks that undertook effective root cause analysis benefited from being able to proactively identify issues and act before they became more widespread.
- Quality of front-line complaint handling:In most banks assessed, the quality of complaint handling undertaken by front-line staff (where complaint handling was not the main function of their role) was poor, with inadequate investigations and poor decision-making regarding both the outcome of the complaint and remedial action (sometimes to the detriment of the complainant). The main driver of this was inadequate support to assist front-line staff in reaching the right decisions (for example, training and competence, policies and procedures, guidance and technical support). Where banks were using the two-stage process, poor front-line complaint handling often acted as a barrier to the fair treatment of complainants.
- Quality assurance of complaints: Most of the quality assurance arrangements we assessed were focused on checking adherence to process (such as meeting timeliness targets) rather than assessing the quality of responses to customers and whether the outcome was fair.
FSA action
Five of the banks we assessed in detail within our review have agreed to make changes as a result of our work and have either put in place or extended the scope of change programmes to improve their complaint handling. Two of these five banks have been referred to Enforcement for further investigation of their complaint handling.
We strongly encourage all firms to take note of our findings and, where appropriate, to act on them. We will continue to focus on complaint handling as part of our more intensive and intrusive supervision of conduct risks. We will also be undertaking follow-up assessments later in 2010 to assess whether the initial change programmes undertaken by the banks included in our review have been effective in raising standards and ensuring that fair consumer outcomes are being delivered.
We have also written to the firms who receive the largest volume of complaints to make them aware of the findings from our review. We have requested that these firms consider the relevance of our findings to their business, and contact their supervisor if they identify any aspects of their complaint handling that requires further action.
Back to top
Template publication
To assist firms, we have published a complaint-handling file review template, which we will use to assess complaint files as part of our supervisory work. It demonstrates the general approach we will use when we undertake an assessment of a firm’s complaint-handling files. The template focuses on assessing the outcome of the complaint (as well as the procedural aspects of complaint handling) and, properly used, it can be an effective diagnostic tool in highlighting weaknesses in a firm's approach. Firms may wish to use the template to help them assess if their complaint handling achieves appropriate outcomes for their customers.
We expect firms to handle any complaints fairly in accordance with our rules in the Dispute Resolution Sourcebook (DISP). This template is intended as a resource for firms to support their own complaint-handling work. Use of the template is not mandatory. Firms may wish to use the template to help them assess if their complaint handling achieves the right outcomes for their customers and may also wish to adapt the template to suit their own procedures and business model.
Limitation of scope
Results from the template will test whether those complaints reviewed resulted in fair outcomes for customers – these results alone will not give a firm an accurate picture of its complaint handling as a whole. Such an assessment would need to take into account other factors – for example, the MI a firm gathers to help it conduct appropriate root cause analysis and the processes it has in place to act on this, the firm’s policies and procedures for complaints, and its reward structure for staff.
Templates
To use the template you will need to save it to a local file and rename it. When the dialogue box opens asking you whether you want to open or save it please open the file then save to a local file as a renamed file.
You will then be able to use it to record your information.
