Tag Archives: fca complaints reporting

Shock Failings In Firms’ Regulated Complaint Handling Rules

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 Are Firm’s Managing Complaints Efficiently And Learning The Lessons From ALL Complaints, Not Just Cherry Picking The Juicy Ones To Report?

The changes made to the FCA’s complaint handling rules in June 2016 are well documented.

In conclusion:

  • The ‘next business day rule’ has been extended to become a ‘three business day rule’ (where sending final response letters (FRLs) are required).
  • Firms must now send a ‘Summary Resolution Communication’ (SRC) in response to all complaints that are dealt with within three days of receipt.
  • The SRC must confirm that the complaint has been resolved and inform the customer of their rights to refer the matter to the Financial Ombudsman Service (FOS).
  • All complaints must be recorded and submitted to the FCA via their new ‘complaints return’.

The rules are designed to benefit customers by “ensuring that complaints are handled quicker, efficiently and transparently”. Firms do not need to try to resolve complaints on the same day in order to avoid reporting or sending the customer an FRL. Consequently, more time and greater consideration can be given to each individual complaint and the circumstances of the complainant. This should also support a more flexible operating model and relieve some operational triage and case management strains.

Firms lose the ability to resolve complaints without reporting them; nevertheless, where all complaints are logged and reported, firms should have access to management information (MI) that better shows their complaint population, and therefore root cause analysis (RCA) should certainly be more robust- revealing a more accurate understanding of the firm’s performance.

Presumably, there are positives for clients and the sector, but how are firms managing the changes?

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WHAT HAVE BEEN THE PRACTICAL IMPLICATIONS FOR FIRMS?
call center-complaint-management-customer serviceTheoretically, where the firm is positive that complaints, which were being closed by the next business day, were identified and resolved fairly (and in-line with regulatory expectations), then the shifting to the new rules should be more straightforward. In this instance, the biggest change for the complaint handling department is logging the complaint correctly, and issuing an SRC to the consumer. This, however, still leads to an immediate need to present systems training to staff, and to update procedures to ensure SRCs are issued to customers in the correct manner.

The new reporting rules mean that there is now a record of every single dissatisfaction handled by the firm, and therefore fair customer outcomes and compliant complaint handling should be demonstrable in every instances. This has exposed some firms’ ability to appropriately identify and handle complaints in their front-line and client service departments, or those who do not handle complaints often. Reasons for this typically include:.

  • A training or capability gap.
  • Conflicting incentive schemes.
  • Inadequate processes and procedures.
  • Inadequate back up and oversight.
  • Issues with company conduct.

Unfortunately, this has also led to the inherent expectation that front-line staff, who might receive complaints infrequently, have the ability to serve as skilled complaint handlers. For some team members, this will feel like a change to their role, so firms ought to provide the appropriate support to individuals for them to execute effective complaint handling that meets regulatory requirements.

Additionally this, the regulatory definition of a complaint- and a firm’s treatment of it- has entered into the center stage. Previously, ‘minor’ or ‘immaterial’ complaints might be quickly dealt with and resolved without too much concern for whether the regulatory definition of a complaint had been met. Now that all complaints are recorded, firms need to be confident that complaints are being identified in line with regulatory expectations, resulting in ‘materiality’ coming into question. This serves to make the understanding of what is and isn’t a complaint an intrinsic part of the process, and comes at the same time as an increased reliance on non-skilled frontline staff to perform complaint handling.

These changes have also meant that firms’ operating models and controls have had to be increased, since added departments and complaint channels should be more closely monitored. Some firms have miscalculated the extent of the required changes.

HOW CAN FIRMS ADDRESS THE CURRENT CHALLENGES?

Firms should reevaluate their complaint handling operating model whilst considering the FCA’s expectations around a ‘fair customer outcome – at the first possible opportunity’, and whilst also reviewing their “risk appetite”. They should be comfortable that complaints will be effectively identified and handled in every front-line area, with relevant evidence of good practice recorded and retained.

Regardless of the process for complaints a firm deems appropriate, as a minimum, complaints ought to be identified successfully by front-line staff, so a level of training, guidance and support is required on an immediate and ongoing basis to reduce ‘knowledge gap’ and ‘skill fade’ threats where complaint handling is not the day-to-day job.

The expectations of staff and the firm should be assessed so as to gain insight on effective ways to align the two. As part of its suite of training pertaining to complaints, firms should also aim to improve their staff members’s contextual knowledge around why effective complaint handling is vital across the industry today. They could also use this opportunity to review their complaint handling culture, and reaffirming the crucial elements of treating customers fairly, where appropriate.

Firms should ensure that they have a clear and, most notably, consistent interpretation of a complaint which gives context and meaning to the idea of ‘materiality’, using a broad spread of real examples in line with their risk appetite.

Firms’ operational controls under the former rules (including quality assurance (QA), training & competence (T&C), MI, RCA and governance arrangements) may never give the full understanding of complaint handling across the company, leading to an increased risk of unjustifiable customer outcomes and regulatory breaches.

Therefore, in order for the firm to show compliant complaint handling to the regulator, these operational controls have to be appropriately broadened (while ensuring a risk-based approach) to give a detailed view of complaint handling in all areas. This causes updated requirements for QA and RCA frameworks, T&C schemes, MI reports, scorecards, training programmes, governance structures and agendas; to name but a few.

Finally, firms should be satisfied that their systems and infrastructure allows them to record, report and handle complaints in line with regulatory expectations. This means ensuring that calls are recorded (i.e. interactions can be evidenced), all relevant individuals have access to the firm’s complaint handling system and the system has the capacity to support effective MI and RCA.

A CONTINUED EXPERIENCE TOWARDS COMPLAINTS EXCELLENCE.

Alongside the initial challenges that were projected at the outset of PS15/ 19 and during the prior consultation, there have been some inadvertent issues arising through the pragmatic implementation of the rules which are more nuanced and tougher for firms to diagnose.

Firms wishing to gain assurance that they are reacting appropriately to these challenges can determine their strategy to the areas above to give themselves a richer picture. It is needless to say perfectly natural that problems should arise when such a significant change is executed, nonetheless it is the ability to react to these challenges with appropriate and proportionate action that will differentiate firms on the market.

If you need assessments of your complaints management, systems and controls or testing of embeddedness of your implementation, contact Compliance Consultant on

+44 (0) 203 815 7939

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