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FCA Complaints Handling Changes in 2016

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The alterations 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 develop into a ‘three business day rule’ (where sending final response letters (FRLs) are concerned).
  • Firms must now send a ‘Summary Resolution Communication’ (SRC) in response to all complaints that are solved 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 devised to benefit customers by “ensuring that complaints are handled faster, efficiently and transparently”. Firms do not have to strive to resolve complaints on the same day in order to avoid reporting or sending the customer an FRL. Consequently, more time and greater consideration might be provided for each individual complaint and the circumstances of the complainant. This should also support a more adaptable operating model and relieve some operable triage and case management pressures.
Firms lose the possibility to resolve complaints without reporting them; on the other hand, where all complaints are logged and reported, firms should have access to management information (MI) that better demonstrates their complaint population, and therefore root cause analysis (RCA) should certainly be more robust- revealing a more accurate picture of the firm’s performance.
Presumably, there are positives for customers and the industry, but how are firms managing the changes?compliance doctor consultants london fca handbook
Theoretically, 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 cross over to the new rules ought to 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 each grievance handled by the firm, and therefore fair customer outcomes and compliant complaint handling will need to be demonstrable in every instances. This has exposed some firms’ capacity to appropriately identify and handle complaints in their frontline and customer services departments, or those who do not handle complaints regularly. Reasons for this typically include:

  • A training or capabilities gap.
  • Conflicting incentive schemes.
  • Inadequate processes and procedures.
  • Inadequate assistance and oversight.
  • Issues with company conduct.

Having said that, this has also resulted in the inherent expectation that frontline staff- who might receive complaints infrequently- have the ability to act as skilled complaint handlers. For some staff members, this will seem like a change to their role, so firms have to provide the appropriate support to individuals for them to execute effective complaint handling that meets regulatory guidelines.
Additionally this, the regulatory definition of a complaint- and a firm’s treatment of it- has entered the spotlight. Previously, ‘minor’ or ‘immaterial’ complaints might be quickly managed 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 supplementary departments and complaint channels have to be more closely monitored. Some firms have taken too lightly the extent of the required changes.
Firms should revaluate their complaint handling operating model whilst thinking about the FCA’s expectations around a ‘fair customer outcome – at the first possible opportunity’, and whilst also checking their “risk appetite”. They should be certain that complaints will be properly identified and handled in each frontline area, with relevant evidence of good practice captured and retained.
Regardless of the process for complaints a firm deems appropriate, as a minimum, complaints must be identified successfully by frontline staff, so a level of training, guidance and support is necessitated on an immediate and ongoing basis to mitigate ‘knowledge gap’ and ‘skill fade’ risks where complaint handling is not the day-to-day role.
The expectancies of staff and the firm should be assessed so as to gain insight on the best ways to align both. As a part of its suite of training related to complaints, firms should also aim to improve their staff members’s contextual understanding around why effective complaint handling is critical across the industry today. They could also use this opportunity to evaluate 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 essentially, constant distinction 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 preceding 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, producing an increased risk of unreasonable customer outcomes and regulatory breaches.
compiance doctor compliance risk management complaintsTherefore, in order for the firm to exhibit compliant complaint handling to the regulator, these operational controls need to be appropriately broadened (while ensuring a risk-based approach) to give a correct view of complaint handling in all areas. This results in updated requirements for QA and RCA frameworks, T&C schemes, MI reports, scorecards, training programmes, governance structures and agendas; to name but a few.
Ultimately, firms have to 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 proven), all relevant individuals have access to the firm’s complaint handling system and the system has the ability to support effective MI and RCA.
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 more difficult for firms to diagnose.
Firms wishing to gain assurance that they are responding appropriately to these challenges can assess their strategy to the areas above to give themselves a fuller picture. It is naturally perfectly natural that problems should arise when such a significant change is carried out, having said that it is the ability to react to these challenges with appropriate and proportionate action that will differentiate firms within the industry.
Lee Werrell – Chartered FCSI
Compliance Doctor
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