Our recent blog highlighted the key changes made to DISP rules by the ADR Directive. The FCA has since published the responses to its complaints handling consultation paper and subsequent policy statement setting out further rule changes.
There are 5 main changes about which firms need to be aware:
1. Next business day rule
The 'next business day rule' is being extended. Firms are permitted to handle complaints less formally without sending a final response letter if they can resolve the complaint by the close of the third business day after the date of receipt of the complaint. The definition of 'by the close of business' will vary between firms depending on the firm's usual business hours.
This is the same approach that needs to be taken when determining when a firm has received a complaint. If a complaint is received after the usual business hours of the firm then it will likely be deemed to have been received on the next day. The opposite is true for firms who operate a 24 hour helpline and so the complaint will likely be deemed to be received when the complaint was made. This means that the rules apply differently between firms and that firms themselves will be required to apply a common sense approach to these issues.
2. Summary resolution communication
If a complaint is resolved by the end of the next business day there is currently no need to inform the complainant that if they become dissatisfied with the resolution that they could complain to the FOS. Owing to a lack of awareness of the FOS, as well as incentivising firms to resolve complaints correctly the first time, the FCA has decided that every complaint resolved by the close of the third business day must now be accompanied by a written 'summary resolution communication'.
The FCA, in DISP1.5.4 R, will prescribe the requirements of a summary resolution communication to include:
- that the firm believes the complaint is resolved; however, if the complainant becomes dissatisfied with the resolution then they can refer the complaint to the FOS.
- the communication must also indicate whether the respondent agrees to waive the time limits by using the appropriate wording as set out in DISP 1 Annex 3 R.
- the communication must also provide the FOS website address and indicate that complainants can find further information there.
DISP 1.5.5G will state that this information should be set out "clearly, comprehensibly, in an easily accessible way and prominently, within the text of those responses".
The new approach mandated by the FCA could dramatically increase the number of FOS complaints, at a time when they are already under pressure to comply with a 90 day timetable for handling complaints under the ADR Directive. This may lead to complaints being inadequately resolved.
3. Complaints reporting procedures
Currently, all complaints resolved by the end of the next business day do not need to be reported under the complaints reporting procedures. The FCA has decided to remove this exception meaning that all complaints, no matter how quickly they are resolved, need to be reported.
4. Complaints reporting data
Firms whose reporting periods fall on or after the 30 June 2016 will need to use the amended 'complaints return' form which has a different range of product and service categories than the current form. If a firm receives less than 500 complaints in the 6 month period then it is able to use a shortened returns form. These forms will need to be completed twice a year.
5. Call charges
The cost of calls consumers make to firms will be limited to a maximum 'basic rate'. A basic rate call means a call that constitutes the simple cost of connection and must not provide a firm with a contribution to its costs or revenues. DISP 1.3.1ACR provides a list of numbers that will comply with the meaning of a basic rate call whereas DISP 1.3.1ADR provides a list of numbers that do not. It is worth noting that this basic rate call charge has a far more general application. It applies to calls about a contract that the consumer has already entered into with that firm and not simply about complaints.
All of the above amendments will take effect from 30 June 2016, except for the changes to call charges (point 5) which takes effect from 26 October 2015.
July 2015 has seen a lot of change to the rules governing how the FOS and how firms must operate when dealing with complaints. With these changes likely to be the most significant for the foreseeable future, it is a good time for firms to update their understanding of the FOS' new DISP rules and to ensure their complaint systems are FCA-compliant. The regulator's next move will likely be enforcement action against those falling short of its expectations.