Complaints handling review findings

We wanted to see how NDTMLs and MTPAs handle complaints and whether their practices pose a risk of customer harm.

We wanted to gauge:

• how firms treat their customers
• whether their complaint handling arrangements pose any potential consumer harm
• what, if anything, firms could do to handle complaints better

What we found

Management Information (MI) including poor Root Cause Analysis (RCA)

Overall, firms have a positive attitude towards complaints RCA. However, it isn’t always clear how firms use their MI (including RCA) to deal with the underlying reasons for complaints. This is because complaints aren’t identified and recorded consistently. This includes not always recording the root cause of complaints.

Senior management and Board reports often only contain operational data and not details on symptoms of complaints, root cause and preventive actions. Also, there are no details on customer experiences and outcomes, and quality of complaints handling.

Tick-box compliance resulting in inflexible complaints handling

Complaint handling operations varies among firms. Looking at firms’ policies and processes, we found some firms look to follow our rules with a tick-box compliance approach, while not fully appreciating the effect on customers. This approach can drive complaints operations in ways which may not be in customers’ best interests.

In some firms there is an over reliance on policies and processes. The resulting tick-box approach can limit staff’s ability to exercise judgement and put customers’ interest first leading to potential harm to customers.

For example errors were made by a firm during the collection of a direct debit. A financially vulnerable customer was asked to contact their own bank to recall the direct debit, as that would be quicker than the process of the firm correcting the error and returning the funds. The firm didn’t adequately consider the impact on the vulnerable customer of having to resolve the problem themselves.

Handling complaints better

Some firms aren’t effectively applying lessons learned from determinations by the Financial Ombudsman Service. Firms may find it useful to review these decisions and technical guidance[2] when thinking about future changes to policies and procedures.

Key messages

The key messages are:

MI including Root Cause Analysis (RCA)

Firms should:

• Ensure the MI they collect and analyse (including for RCA) is accurate and relevant to its operations as it is an important tool for firms. It helps to measure whether customers are treated fairly and identify ways improve customer outcomes.
• Have robust RCA capabilities to identify and remedy any recurring systemic problems. Effective RCA should allow firms to find and tackle the root causes of problems (through a process change or improvement).
• Have appropriate governance and processes in place to make sure RCA provides strategic purpose, accurately identifying recurring or systemic problems.

Complaint handling policies and procedures

Firms must:

• Establish and maintain effective and transparent procedures for the reasonable and prompt handling of complaints. Firms should also make sure they reduce the risk of over reliance on policies and procedures. Firms should consider, for each complaint, whether the customers’ outcome and experience shows the firm has put the customers interests first. Inadequate application of good judgement – and the principle of treating customers fairly – may lead to poor outcomes.
• Make sure they assess complaints fairly, consistently and promptly.

Recording complaints

Firms should:

• Record complaints accurately. Weaknesses and failures in recording complaints may result in poor customer experiences and outcomes, and affect firms’ ability to put things right.
• Make sure their internal systems and controls allow staff to identify and record complaints correctly.
• Have processes in place to make sure the data in its FCA annual or biannual complaints return is accurate.

Next Steps

Our ‘Understanding complaints root cause analysis[3]’ hypothetical case study helps firms to distinguish between a symptom and the root cause of a complaint. It also shows what complaints RCA looks like. The case study is not sector specific and may be of use to any regulated firm.