Complaints handling is (sort of) back in the headlines.
This time the FCA has written to firms with consumer credit permissions, to say that following its review, it had identified:
- a failure to provide to customers the required information about the Financial Ombudsman Service – this included failing to provide details of the complainant’s right to refer to the ombudsman if they remain dissatisfied;
- a failure to provide a clear explanation, to the complainant, of the outcome of the complaint and why this outcome had been reached; and
- a lack of management controls in place to analyse and remedy any root causes of complaints or systemic problems.
The regulator hinted that lenders (who include payday loan providers), were manipulating their FCA reportable complaints handling performance statistics by neither upholding nor rejecting complaints, instead making ex gratia payments that were very similar in amount to their upheld complaints.
The FCA’s previous intervention in the complaint handling space covered packaged bank account complaints. It identified similar concerns:
- setting out clearly and accurately what the firm has understood the customer’s concerns to be;
- accurately reflecting the investigation that was actually undertaken (according to the record on the complaint file); and
- fully addressing every complaint point (or each key theme, where there are multiple complaint points that can be grouped together).
Of course, the gold standard for FCA involvement in complaints handling has to be payment protection insurance, now the subject of a very formal deadline (fronted by a rubber mask based on Arnold Schwarzenegger). For all the FCA’s focus on DISP 1.3.3R (a rule requiring firms to identify the root causes of complaints, see if they impact processes or products not directly complained of, and correct these) PPI was never subject to an industry scheme, whereby all customers were offered redress automatically. This gave a massive boost to the claims management company sector (and the advertising sales departments of most UK tabloids and radio stations).
Meanwhile, the most recent set of quarterly FOS complaints by product category saw 59% of payday loan complaints upheld in the customer’s favour by the FOS between April 2016 and March 2017. These were customer complaints reviewed and rejected by firms. Given this, why aren’t we hearing more about an industry-wide scheme, offering to settle payday loan complaints proactively, by reference to DISP 1.3.3R? The claims management companies are already operating in this space (and taking a much higher share of the smaller amount of redress paid). It may be, that having considered the figures, the FCA decided against it, on the basis that most payday lenders would be rendered insolvent. Still, it’s a bit off. The Ombudsman experience is every bit as bad as payment protection (currently running at a 52% uphold rate), and the FCA has already identified that many customers were not advised of their right to refer a rejected complaint to the FOS.
What are the take-aways?
The FCA is aware that complaints handling statistics are not as reliable as they might be. So the Ombudsman service experience serves to enrich their view (they have a memorandum of understanding and an information gateway in place for this sort of thing). Overall, it’s much harder to hide a problem product. Firms should probably stop bothering.