The Financial Conduct Authority (FCA) has chosen to write to all CEOs, or equivalent, of the 50,000 or so consumer credit firms in the UK. The regulator’s recent supervision activities, which included a thematic review into how credit firms deal with customer complaints, have revealed some basic flaws in firms’ processes and practices.

In the letter, the FCA states how it believes that the way a firm responds to complaints can indicate whether, in a wider sense, fair treatment of customers is central to the corporate culture.

The letter reads:

“Firms’ attitudes to complaints are a strong indicator of their culture and whether they have customers at the heart of their business. Those firms that care about their customers and want to do better recognise that complaints are an opportunity to identify and rectify failings and strengthen relationships with their customers. Conversely, those firms that consider complaints as a nuisance and do not take them sufficiently seriously are unlikely to have a culture that leads to positive customer outcomes.”

Some of the issues highlighted by the FCA in the letter include:

• Almost half of firms had websites that did not make customers aware of their right to refer complaints to the Financial Ombudsman Service (FOS).
• Around a quarter of firms either had no information on their websites about how to make a complaint, or else the complaints information on their sites was difficult to locate. Other firms did publish their complaints procedures on their website, but in many cases the FCA says these procedures lacked basic information, such as when complaints would be acknowledged or final response letters issued.
• Almost one-fifth of firms were found to still be operating ‘two-stage’ complaints processes. This type of arrangement usually involves complaints being escalated internally if the customer indicates they are dissatisfied with the firm’s initial attempt to address the complaint. The FCA’s rules now specifically prohibit this type of two-stage process, as it has been found to deter customers from pursuing complaints against firms
• There were a number of issues regarding the quality of final response letters, including:
o Failing to explain how the complaint had been assessed and investigated
o Not clearly explaining whether the complaint had been upheld or rejected
o Neglecting to explain why a complaint had been rejected
o Failing to mention the time limits that apply when customers wish to refer complaints to the FOS
o Not stating that the service provided by the FOS is free of charge, or not providing the website address of the FOS in the final response, or not enclosing a copy of the FOS leaflet
• Many firms were not carrying out root cause analysis on complaints received, with a view to reducing the likelihood of similar complaints in the future. When a complaint is received, firms should consider, for example, whether it may be necessary to change business practices or procedures, or provide extra training to one or more employees
• Many firms are still not providing accurate complaints data returns. Specifically, the FCA reminds firms that they are now required to record and report all complaints, including those that are resolved within three business days of receipt

All firms with credit permissions are now expected to take careful note of the contents of the letter, and to consider whether any changes to complaints procedures and practices are required in their firms.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.