03 August 2015 - Post by:Sarah Hitchins
Last week, we commented on the latest changes to the FCA’s complaints handling rules (available here). Complaints handling has long been a focus of the FCA and we have seen a steady stream of FCA enforcement cases in which firms and individuals have been criticised for their approaches to complaint handling. Each case tends to be presented in a way which is fact-specific, thereby making it difficult for firms to discern more general principles and lessons to be learned from these cases. Here we look at some of the more common pitfalls relating to complaints handling that been highlighted in recent FCA enforcement cases:
#1: When template complaint response letters can be too restrictive
Template complaint response letters are commonly used in firms. In large-scale complaint handling exercises, they play an important role in terms of helping to ensure consistency between complaint responses. However, the FCA has identified cases where template complaint response letters have not really fitted the complaints being responded to, with the result that customers inadvertently received inaccurate or misleading responses to their complaints. When using template complaint letters, care should be taken to ensure that there is sufficient room for flexibility to allow a response to fit the complaint it relates to, or that complaint handlers are at least prompted to escalate instances where they feel that a template complaint response letter will not suffice.
Firms relying on ‘good’ metrics such as a low complaint uphold rates or high volumes of complaints being closed in a short space of time to justify the adequacy and quality of their complaints handling processes should proceed with caution. As part of firms’ processes for monitoring complaint handlers, the FCA is likely to expect firms to drill-down into metrics like this to identify whether there are underlying problems with sales processes and/or the way in which complaints are being handled.
#3: Incentivising complaints handlers – quality not quantity
The FCA has previously identified remuneration structures for complaints handlers that incentivised them to close as many complaints as possible in a short space of time, thereby increasing the risk that complaints may not be dealt with fairly. Firms should ensure that the quality – not quantity – of complaint handling sits at the heart of remuneration structures for complaints handlers.
#4: Complaints handling policies are not static documents
For larger complaint handling exercises, firms often design and implement a policy which sets out how complaints should be considered and dealt with. However, all too often has the FCA found that such policies are not updated or amended as complaint handling exercises progress. Where complaint handling policies are implemented, responsibility for reviewing and updating these policies should be clearly allocated at the outset and checks should be undertaken on a regular basis to ensure that the policy remains fit for purpose.
#5: The dangers of ‘re-creating’ customer and complaint files
The way that the FCA typically approaches assessing the adequacy of complaint handling in an enforcement context is to request and review a sample of customer and complaint files. Contrary to what the FCA usually expects, the papers that comprise these customer and complaint files rarely sit in one place and are not available at the click of a single button. As a result, firms often face the challenge of ‘re-creating’ customer and complaint files, drawing documents from a variety of sources. However, care should be taken to ensure that the FCA does not later allege that these customer and complaint files have been ‘altered’ due to the way in which they have been ‘re-created’. To help mitigate this risk, firms should ensure that they are fully transparent with the FCA when handing over customer and complaint files in terms of how they have been compiled.