Treating Customers Fairly

Fact sheet 8: Complaint Handling

The Financial Services Authority (FSA) have identified the importance of their principle that a firm must pay due regard to the interests of its customers and treat them fairly. This requirement has been underlined by reference to other FSA Principles, the FSA Business Plans, speeches and other output.

FSA Supervision is also focusing on Treating Customers Fairly (TCF) when examining the way in which firms conduct their business.

The FSA, in the Dispute Resolution Complaints (DISP) section of the handbook, clearly defines that any expression of dissatisfaction should be treated as a complaint, and sets standards for the approach that a firm should follow in dealing with complaints.

By definition any customer who feels that they need to make a complaint may well be indicating that they feel they have not been treated fairly, and if for no other reason, the nature of all complaints should be carefully recorded and analysed to identify any trends at the earliest possible stage. The correct handing of complaints can have a positive impact on customer relations and early identification of a systematic problem can prevent significant costs.

Complaints experience can also be useful for identifying process improvements and should routinely be incorporated into training content.

It is desirable that complaints should be dealt with by individuals who have not been involved in the circumstances which are identified as the cause of the grievance. In one-man firms this will not be possible but sole proprietors should ensure that they retain objectivity and encourage the use of services of the Financial Ombudsman Scheme (FOS) where necessary to ensure that their customers receive fair treatment. Good record keeping will be paramount.

Larger firms should be careful in the way in which their complaint handlers are remunerated, incentivised, or targeted. Care should be taken to ensure that none of the practices followed in these areas lead staff to place greater emphasis on the interests of the firm than those of the customer.

These factors are also applicable where a firm has outsourced their complaint handling processes, and in these cases the firm must recognise that as the registered firm they will still be responsible for ensuring that clients are properly dealt with and must therefore closely monitor the activities of their agents.

Where it is decided to offer redress then the calculation of the amount must take account of all of the various factors involved and the offer made to the client must cover all losses and costs involved.

The use of the FOS has already been referred to in respect of small firms. Large firms must also strictly adhere to the COB rule requirements in terms of advising customers of their rights, and also in terms of the way in which the firm responds when a case has been referred.

The benefit to the firm of analysing complaint experience has been referred to, but there are additionally other requirements regarding complaint records. The FSA require all registered firms to report complaints to them in a routine manner and under the Systems and Controls manual (SYSC), a firm will also be expected to record and analyse complaint Management Information (MI) as a key mechanism for controlling and understanding the business.