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In July 2015, the Financial Conduct Authority (FCA) published its long awaited Policy Statement PS15/19 (the Statement) on Improving Complaint Handling. It sets out the FCA’s feedback following responses received to the consultation paper (the Consultation) issued in December 2015 and the final changes to the complaints handling rules as a result. The Statement also builds upon the findings of the FCA’s thematic review into Complaint Handling of November 2014 (the Review).
We considered the Review and the Consultation in January 2015 and you can read our full briefing here.
Complaint handling remains high on the FCA’s agenda because ensuring that firms treat customers fairly is at the heart of its consumer protection agenda and complaint handling is a key barometer of the culture of a firm. The FCA hopes that the new rules will benefit consumers who wish to complain by ensuring complaints are handled more quickly, easily and transparently than at present.
All firms will now need to consider the changes in the Statement and evaluate their complaint handling procedures prior to the implementation dates, some of which are as early as October 2015. We will be holding an event in November 2015 to discuss the changes further with clients and hear from the FCA and the Financial Ombudsman Service (FOS) on their views around what firms should be doing in response to the new rules.
The Statement sets out five new requirements for firms:
- extending the ‘next business day rule’, where firms are permitted to handle complaints less formally and without sending a final response letter, to the close of three business days after the date of receipt;
- firms must report all complaints, including those handled by the close of three business days after the firm receives them;
- raising consumer awareness of the FOS, by firms sending a ‘summary resolution communication’ following the resolution of complaints handled by the close of the third business day after receipt;
- firms must comply with rules limiting the cost of calls consumers make to firms to a maximum ‘basic rate’, including all post-contractual calls and all complaints calls; and
- firms must complete a new ‘complaints return’ which requires firms to send data to the FCA twice a year on the number of complaints they receive.
The changes affect all FCA-regulated firms within the scope of the Compulsory Jurisdiction of FOS and across all financial services sectors. For those firms in the Voluntary Jurisdiction of FOS, separate rules will be published in the next month.
Responses to the Consultation
The FCA received 125 responses to the Consultation, from a wide range of firms as well as trade associations, consumer groups and charities.
Concerns were raised by some respondents regarding the measure requiring firms to send a summary resolution communication telling complainants about their rights to refer a complaint to FOS. The FCA believed however that the benefits to consumers of this increased transparency outweighed the greater administrative burden placed upon firms by the change.
Respondents were generally very supportive of the proposal to limit the cost of call charges, although some raised concerns about the proposed period for implementation. The FCA has listened to those concerns and delayed the implementation date, as well as clarifying there is no obligation for firms to update all promotional literature by that date.
Timeline for implementation of the changes
The FCA have set the following implementation dates for the changes:
26 October 2015
- Limiting the cost of calls consumers make to firms to a maximum ‘basic rate’, including all post-contractual calls and all complaints calls.
30 June 2016
- Extending the ‘next business day rule’, to the close of three business days after the date of receipt.
- Reporting all complaints, including those handled by the close of three business days after the firm receives them.
- Sending a ‘summary resolution communication’ following the resolution of complaints handled by the close of the third business day after receipt.
- Completing the new ‘complaints return’ to send data to the FCA twice a year on the number of complaints firms receive. Note, this means firms will need to report complaints data using the new complaints return for any reporting period ending on or after 30 June 2016 and will need to have systems in place to record and report data in line with this.
So, what should you do now?
Firms should review their complaint handling policies and practices to ensure they are ready for the implementation dates outlined above.
The changes limiting the cost of calls to consumers apply to both complaint and post-contractual (e.g. account management) calls and the technical changes needed may require prompt action by firms to ensure they are compliant with the new rules in time for 26 October 2015.
Firms should consider how best to implement the remaining changes by 30 June 2016 and ensure procedures are put in place to cope with the additional administrative burdens imposed and all staff are fully conversant with the new processes.
The final changes that have been confirmed are very much in line with the Consultation so there are no surprises in the final rules published. However, there are two key concerns arising which are worth flagging:
Increase in FOS cases
There is understandable concern from firms about the practical implications of the new ‘summary resolution communication’. Given more complaints should now be resolved at the early informal stage, the new communication may lead to an increase in cases going to FOS which might otherwise be resolved by the firm through its more formal 8 week process used for handling other complaints not resolved at this early stage.
The answer to this may be that firms will need to be confident that the proposed solution fully resolves the complaint before seeking to conclude it in the informal 3 day period. If there is doubt, complaints could be dealt with over a longer period to allow firms to ensure they are fully concluded before customers consider whether they need to refer the matter to FOS.
At present, complaints are only reported if they are not resolved informally before the end of the next business day after they arise. The new rules require all complaints to be reported. This is likely to bring renewed focus on the definition of complaint. The key issue here is the wording, “the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience”. There is no definition of materiality and no current plans for FCA to clarify how this should be interpreted. The addition of minor complaints that are quickly resolved having to be reported brings this in to the spotlight. As the level of complaints each firm receives is published, there will be a natural desire only to report complaints that fall within the definition. The usefulness and accuracy of complaints data will therefore depend on a sensible and consistent interpretation of this definition. This is an area to watch as the new rules are implemented.