Treating Customers Fairly (TCF) is a key FSA regulatory priority. Firms should be taking urgent steps to make it an integral part of their business models and commercial strategies.

By the end of December 2008, FSA expects firms to be able to demonstrate they consistently deliver fair outcomes for customers. The outcomes focus on consumer experience of products and services, but this does not just mean having fair product terms. Firms will have to show senior management has instilled a corporate culture of treating customers fairly. They must have appropriate systems and controls in place to measure TCF outcomes and to identify and learn from any mistakes.

Systems and controls come from the top. The right level of MI, sent to the right people and used in the right way, is key. Components of a good TCF programme might include:

  • personal objectives and rewards structures for staff at all levels based on delivering fairness;
  • staff forums and TCF training;
  • appointing a TCF champion;
  • customer feedback forums and questionnaires;
  • senior management reviews of customer feedback;
  • acting on a root-cause analysis of complaints;
  • building TCF into any changes to documents or procedures, however small; and
  • working with advisers to get independent assessment of the firm's business models.

Firms will have to show not only that they have collected management information to test compliance with TCF, but also that they have used it effectively to address any shortfalls.

FSA is not giving firms any leeway after its December deadline. FSA announced yesterday that it will integrate TCF into its core supervisory work earlier than expected. From January 2009, TCF will be embedded into ARROW and become a key part of regular assessments of relationship managed firms. These assessments might involve:

  • reviewing customer documentation;
  • looking at advice files;
  • listening to customer calls; or
  • mystery shopping.

FSA will assess the progress of small firms using its three-year regional assessment programme under the enhanced strategy. FSA will publish its findings in its 2009 Annual Report.

FSA is committed to TCF and will not be lenient towards firms that have not embraced the culture. We can expect some high-profile enforcement. FSA said yesterday that the standard against which firms will be judged remains high, and the penalties for not complying remain tough.