30th June 2016 sees the introduction of new rules from the FCA (Financial Conduct Authority) concerning complaints handling and reporting so it is perhaps an opportune time to remind regulated firms what the changes are.
Extending the informal ‘next business day rule’ to the close of three business days after the date of receipt.
Sending a ‘summary resolution communication’ following the resolution of complaints handled under the amended ‘informal’ procedure.
Reporting all complaints, including those handled under the amended ‘informal’ procedure.
Completing a new ‘complaints return’ to send data to the FCA twice a year on the number of complaints firms receive – with amended categories.
Insurers and brokers, if they haven’t already done, so should review and update their complaint handling policies and practices to ensure they are ready.
There will be additional obligations imposed and all staff will need to be fully conversant with the new processes.
The provision in the FCA Handbook dealing with the informal resolution of complaints (DISP 1.5) has been amended – firms will now have until close of the third business day to resolve complaints informally.
Currently, firms have until the close of business on the day after the complaint is received before they are required to follow the FCA’s formal complaints procedure.
This amendment is intended to allow firms to resolve more complaints first time rather than try to meet the current one day target, thus avoiding having to implement the formal complaint handling rules and associated reporting requirements.
The latest quarterly complaints statistics published by the Financial Ombudsman Service show that the number of complaints upheld in favour of consumers was 54%.
Across the entire range of regulated firms, organisations are making the wrong decision on complaints more often than they’re making the right one.
If a complaint is resolved during this three day period, the firm must send a simpler ‘summary resolution communication’ to the complainant (DISP 1.5.4) rather than the final response letter required under the formal arrangements.
This communication has to be in writing and as well as referring to the complaint and noting that it is now considered to be resolved, the summary resolution communication must inform the complainant that they may be able to refer their complaint to the Financial Ombudsman Service (FOS) if they subsequently decide they are dissatisfied.
The website of the FOS must be included and reference made to the availability of further information on the website.
Again, this requirement is to provide an incentive for firms to ensure that they handle complaints correctly the first time.
It has been suggested that the practical implications of the new ‘summary resolution communication’ will lead to additional complaints being referred to the FOS.
This is on the basis that whilst more complaints should be resolved at the early informal stage, the new summary resolution communication draws attention to the services of the FOS.
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 the FOS.
The new rules require all complaints to be reported, including those dealt with under the informal mechanism, described above.
Whilst all firms should have in place a complaint mechanism for all customers, the complaint handling rules apply to eligible complainants, defined as:
A micro-enterprise – employs fewer than 10 persons and has a turnover or annual balance sheet that does not exceed €2 million.
A charity which has an annual income of less than £1 million.
A trustee of a trust which has a net asset value of less than £1 million.
A complaint is defined and in short, is any oral or written expression of dissatisfaction, whether justified or not which alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience.
What constitutes ‘material’ is subjective but the website of the Financial Ombudsman Service provides plenty of content on their approach to complaints. For example, they state that:
“As well as looking at whether someone’s lost out financially as a result of a mistake, it’s important to recognise the emotional or practical effect it’s had. This “non-financial” effect could be:
distress – including embarrassment, anxiety, disappointment, loss of expectation, upset and stress. There may be some overlap with pain and suffering (see below) – for example, if the distress made someone ill;
inconvenience – including the time someone’s spent and/or effort they’ve had to go to as a result of a business’ mistake;
pain and suffering – including physical or mental suffering arising from what a business has done; or
damage to reputation – where someone’s personal reputation has been negatively affected as a direct result of a business’s actions”
(Source – Website of FOS)
A consistent approach as to what constitutes a complaint is needed and communicated across a firm.
Staff training will be vital and will need to include everyone who has any form of contact with a client. The receptionist answering the phone needs to be able to identify a ‘complaint’ and respond in an appropriate manner.
Firms should use the complaints data produced to identify how, when and where issues arise and as an early warning system for bigger, perhaps systemic, problems. An analysis of complaints data should assist in eliminating the root cause of complaints and accordingly enhance the overall customer experience.
Inevitably matters will go wrong from time to time but the quality of a firm’s complaint handling capability will form a crucial aspect of the customer experience.
Remember, a well-handled complaint can strengthen the customer relationship, even to the point that it is actually stronger than before the problem.