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The Changes to Regulated Compliant Handling Rules 2016

The changes made to the FCA’s complaint handling rules in June 2016 are well documented and should be adopted by every financial services firm buy now.

In summary:

  • 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 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 have to 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, easily and transparently”. Firms do not need to attempt to resolve complaints on the same day in order to avoid reporting or sending the customer an FRL. As a result, more time and greater consideration can be provided for 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 burdens.
values compliance consultant london compliance framework annual monitoring planFirms lose the possibility to resolve complaints without reporting them; nevertheless, where all complaints are logged and reported, firms should have access to management information (MI) that better reflects their complaint population, and therefore root cause analysis (RCA) should be more robust- revealing a more accurate picture of the firm’s performance.
On the face of it, there are positives for customers and the industry, but how are firms handling the changes?
Theoretically, where the firm is confident that complaints, which were being closed by the next business day, were identified and resolved fairly (and in-line with regulatory expectations), then the change to the new rules should be more straightforward. In this example, the biggest change for the complaint handling department is logging the complaint correctly, and issuing an SRC to the client. This, however, still produces an immediate need to roll out 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 each instances. This has exposed some firms’ ability to appropriately identify and handle complaints in their frontline and customer care departments, or those who do not handle complaints regularly. Reasons for this typically include:.

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

Nevertheless, this has also resulted in the inherent expectation that frontline staff- who might receive complaints infrequently- are able to serve as skilled complaint handlers. For some team members, this will feel like a change to their role, so firms must provide the appropriate support to individuals for them to perform effective complaint handling that meets regulatory guidelines.
Aside from this, the regulatory definition of a complaint- and a firm’s treatment of it- has come into the spotlight. Previously, ‘minor’ or ‘immaterial’ complaints could be quickly handled 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 augmented, 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 taking into account the FCA’s expectations around a ‘fair customer outcome – at the earliest feasible opportunity’, and whilst also evaluating their “risk appetite”. They should be certain that complaints will be effectively identified and handled in every frontline area, with applicable evidence of good practice recorded and retained.
Regardless of the process for complaints a firm deems appropriate, as a minimum, complaints should be identified successfully by frontline staff, so a level of training, guidance and support is necessitated on an immediate and ongoing basis to minimize ‘knowledge gap’ and ‘skill fade’ threats where complaint handling is not the day-to-day role.
The expectations of staff and the firm should be assessed in order to gain insight on how you can align the two. 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 essential across the industry today. They could also use this opportunity to determine their complaint handling culture, and reaffirming the cornerstones of treating customers fairly, where appropriate.
Firms should ensure that they have a clear and, most significantly, 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 previous rules (including quality assurance (QA), training & competence (T&C), MI, RCA and governance arrangements) may never give the full idea of complaint handling across the company, causing an increased risk of unjust customer outcomes and regulatory breaches.
making comoliance work compliance doctorTherefore, in order for the firm to exhibit compliant complaint handling to the regulator, these operational controls should be appropriately broadened (while ensuring a risk-based approach) to give a specific 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 ability to support effective MI and RCA.
As well as 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 reasonable implementation of the rules which are more nuanced and tougher for firms to diagnose.
Firms wishing to gain assurance that they are replying appropriately to these challenges can determine their approach to the areas above to give themselves a richer picture. It is naturally perfectly natural that tasks should arise when such a significant change is carried out, nevertheless it is the ability to react to these challenges with appropriate and proportionate action that will differentiate firms in the marketplace.
Lee Werrell Chartered FCSI
Compliance Doctor
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