Complaints Handling & Dealing with the FOS

Transcription

1 Complaints Handling & Dealing with the FOS Simon Morris Alison McHaffie March 2014

2 Looking at 1. The regulatory focus on complaints 2. Pressure on customer communications 3. FCA expectation on complaints handling 4. Handling and challenging the FOS.

3 1. The regulatory focus on complaints a) We will focus on the effectiveness of complaints handling in [major banks] through our supervision and we will widen this to include firms from other sectors. b) The supervisory approach will consider key stages of a complaints lifecycle which, if ineffective, may act as a barrier to fair treatment of the complainant. c) We will also consider the effectiveness of the firm in identifying emerging conduct risks through their complaints data and the action they take as a result. FCA business plan 2012/13

4 A thematic review for issue in Q a) The amount of complaints that go to the Ombudsman suggests that something isn t working in the way in which firms manage and investigate customers complaints. So we are going to undertake a thematic review of complaint handling and management in major firms b) The thematic review will identify why complaint handling is not working well for some consumers and address any poor practice within firms. c) We will use our new assessment approach to place greater onus on senior persons to understand how effective their firm s complaints handling process is, and how they use the complaints experience to identify and correct the systemic causes behind customers complaints. FCA business plan 2013/14

5 With a contribution from FOS I m starting to believe that the experience of the last decade has fostered the lost generation of customers. A generation of mistrust and missed opportunities meaning that instead of focusing on growth and innovation, you now have to focus on repairing reputations. You need to deal with this if you want to rebuild trust. But the good news is that you have the power to stop this cycle of scandal in its tracks. And I truly believe it starts with turning it around for customers who make complaints. Extracts from FOS: Speech by Natalie Ceeney: The power of listening: rebuilding trust by setting new standards (BBA, 17 October 2013)

6 And FCA board-level surveillance The Board questioned and discussed the issues facing the Supervision division and noted a number of points, including resourcing against risk and co-ordination across the organisations, as well as the following points: there were various ways of gathering intelligence, such as through the Ombudsman Service, the Statutory Panels, the FCA helplines and other stakeholder groups; Extracts from FCA Board Minutes: (26 September 2013)

7 Gathering intelligence for the competition objective We will identify markets for financial services that appear not to be working well using information from a range of sources, such as our own intelligence, past studies, internal papers and analyses, supercomplaints, market intelligence and complaints from third parties. The FCA market study process

8 Complaints as indicators of culture What does your complaints handling say about your culture? Extracts from FCA: Speech by Simon Green: What does the future of insurance broking look like? (Incisive Media Insurance Age Regulation, 2 July 2013) The deep dives will be designed to allow us to form overall supervisory judgements; for example, whether the culture that has been set at the top is reflected in branches, in the back office and when customers complain. Extracts from FCA Approach to Supervision April 2013

9 So what does this tell us? 1. Regulatory imperative 2. Senior management focus 3. Forthcoming thematic review a) Resulting remedial requirement b) And affirmations 4. Basis of supervisory judgement a) Test of culture

10 2. Pressure on customer communications Publicising firms redress YBS announcement Inclusion of FOS wording In customer communications Encouraging consumers to claim Alert to the limitations FCA s April 2013 research paper

11 Arch Cru s404 scheme We have considered the suggestions in the responses that issuing complaints handling guidance would be preferable to a s.404 scheme. However, this option would not deliver a significant level of redress because it relies on consumers bringing complaints to firms and (from previous experience) the response rate when consumers are called on to complain is usually low... Arch Cru s404 Scheme December 2012

12 Encouraging consumers to claim redress 1. Envelope adds a message to act quickly to a plain envelope 2. Uses the FCA logo in the letter head 3. Makes the body of the letter simpler and more concise, by reducing the text by 40% 4. Claims process includes a sentence in bold explaining that the claims process would only take five minutes 5. Uses the firm CEO s signature to sign the letter, instead of a generic Customer Team 6. Reminder sends a second letter three to six weeks after the first

13 3. Handling the complaint

14 The Rules you must have procedures 1. Effective and transparent 2. Reasonable and prompt handling of complaints 3. Identify and remedy systemic problems 4. Publish summary procedures 5. Refer to at point of sale 6. Provide on request/acknowledging complaint

15 The Rules what process? Receive and recognise Investigate Competently Diligently Impartially Assess fairly, consistently and promptly Offer redress/remedy if appropriate Explain decision Promptly comply if accepted Taking the evidence into account Similarity with other complaints FCA and FOS guidance & cases

16 And you should also 1. Log with enough detail for RCA 2. Refer to central function if significant volume 3. Structure & staff it adequately 4. With full MI 5. And senior management oversight

17 And the task is Investigate the suitability of the sale not the adequacy of the complaint Review point of sale material Get adviser statement Obtain further information from customer Was the advice suitable? Was the promotion clear? Was this a good sale?

18 Evaluation & communication Evaluating 1. Oral evidence can suffice 2. Diligently investigate the issues 3. Clarify ambiguities and conflicts 4. Don t be too literal 5. Risk warnings or signatures may not suffice 6. Be prepared to give the benefit of the doubt Communicating 1. Plain English 2. Begin with summary 3. Describe product 4. Summarise complaint 5. Give your reasons why 6. Redress rationale and figures

19 And also The three dimensions Is this a systemic problem? Looking at other issues? What about the future?

20 Because if you don t handle your complaints properly

21 Failing to establish a TCF culture with regard to complaints The firm failed to treat its customers fairly because it failed to identify and address inappropriate bias within the remuneration structure for the complaint handling teams, which incentivised staff to close as many complaints as possible failed to have in place an effective customer complaint handling process, which meant that it failed to investigate and resolve all customer complaints fairly, including failing to offer customers appropriate redress (largely through an introduction of a fast track process) failed to consider compliance monitoring reports during Board meetings and they were not included as a matter of course in the Board packs Final Notice Homeserve Membership Limited February 2014

22 Failing to treat complainants fairly The firm failed to treat its customers fairly because it didn t categorise and record all customer expressions of dissatisfaction about insurance policies sold by the AR accurately and consistently record the details and outcomes of customer complaints; investigate fully some customers complaints resolve some customer complaints as in some cases it offered customers a gesture of goodwill, the amount of which was left to the discretion of the complaint handler; and undertake a root cause analysis of customers complaints in accordance with DISP 1.3.3R. (4) Final Notice PAS July 2013

23 Failing to manage bulk redress Sent 582,206 decision letters to PPI complainants, agreeing to pay redress to them... aimed to make payment within 28 days of these decision letters. The firm failed to do so in up to 140,209 (24%) cases. 24,589 (4%) cases dropped out of its PPI redress payments process, and remedial action had to be taken subsequently to ensure those payments were made. The firm failed to establish an adequate process for preparing redress payments to send to PPI complainants. In addition to a lack of initial planning, its staff engaged on the redress process did not have the collective knowledge and experience to ensure that the process worked properly. Final Notice Lloyds/BoS February 2013

24 Which emphasises the need for 1. Training 2. Record keeping 3. Investigation 4. Performing root cause analysis 5. Adequate resourcing 6. Management oversight

25 4. Handling & challenging the FOS

26 The trends at the FOS

27 The FOS today Annually 2012/13 378,000 PPI (74%) & 138,000 other 1 of 4 of the initial consumer enquiries received turned into a formal dispute Banking, credit, mortgages charges, administration, sales and advice Credit cards Payday loans Current accounts including packaged bank accounts Mortgages Insurance (other than PPI) claims, sales and administration Motor Buildings, term assurance, travel, health and medical Investment sales and advice (attitude to risk/suitability) With profits/ unit linked bonds, investment ISAs Personal pension plans

28 What does FOS do? A private independent dispute resolution scheme Set up under statute To resolve complaints between consumers and firms Free of charge to consumers an alternative to court FOS pledges to do so Quickly Impartially Minimum of formality Fairly and reasonably

29 Why is FOS important? Co-operation required with FOS (DISP 1.4.4R) Complaints handling is high on FCA s agenda and FOS shares information with FCA Publication of FOS data has impact on a firm s reputation

30 FOS s remit a quick recap Complaints from eligible complainants against firms Consumers (private individuals) Micro enterprise Very small charities and trusts Relating to most types of financial products and services provided in or from UK Complainant has relevant relationship with firm (DISP 2.7.6) Which firm has had opportunity to review Within necessary time limits generally 6 months from firm s final response and within limitation period If upheld FOS can make a financial award or direction

31 How does FOS determine complaints? Basis of what is fair and reasonable in particular circumstances of the case Meaning: must take account, but not necessarily follow, the law Includes good industry practice FOS awards up to a maximum of 150k plus any interest and costs No right of appeal for firms; firms, but not consumers, are bound by final decision Disclosure and confidentiality DISP can accept information in confidence

32 Process 1. Customer completes FOS complaints form 2. FOS reviews and checks jurisdiction 3. FOS may try informal settlement or mediation 4. Settlement agreement 5. FOS investigates calls for file 6. Adjudication 7. Final Decision increasing trend

33 How to manage a FOS complaint 1. Consider jurisdiction challenge or early dismissal? 2. Provide all relevant information a) Review file and explain your case b) Provide clear, comprehensive and measured response to adjudication dealing with all points 3. For significant cases consider request for review by Ombudsman 4. Open dialogue with FOS 5. Consider use of FOS discretionary procedures a) Hearing b) Lead case c) Test case

34 Available procedures (1) Hearings Right to request hearing Request should not be automatic Give clear reasons Ombudsman must consider whether fair decision without one Not usually granted unless conflict of oral evidence/expert evidence Impact of Article 6, ECHR Inquisitional rather than adversarial Legal representation

35 Available procedures (2) Lead case procedure Large number of cases to avoid duplication and achieve consistency The procedure Ombudsman s decision if to adopt Firm can challenge Does firm want to accept cases are homogenous? Better dealt with through the courts?

36 Available procedures (3) Test case procedure Firm can request before final determination if important or novel point of law Firm must undertake to pay reasonable costs of complainant Ombudsman has ultimate discretion to decide

37 Challenging FOS (1) At the outset Jurisdiction Eligibility Relevant transitional complaint? Time limits Grounds for early dismissal? Consider reasons in DISP FOS s decision

38 Challenging FOS (2) Merits of the complaint Pre and post adjudication Effective and clear explanation in response Expert evidence? Stand alone response Consider request for a hearing

39 Challenging FOS (3) Judicial Review Post Ombudsman Final Decision Application within 3 months Breadth of FOS s "fair and reasonable" jurisdiction No requirement that FOS is bound by the law but must consider it Non interventionist approach by Courts Grounds? FOS has made an error of law in exercising its powers or duties Decision is unreasonable, not made in good faith or on proper grounds Serious procedural irregularity on the part of FOS, or where it has acted for an improper purpose

40 Challenging FOS unsuccessfully An IFA challenged a final decision on three grounds: 1.The FOS investigation lasted over six years and had followed four years of activity by the FCA and the FSCS. This breached the claimant s rights at common law and under Article 6 ECHR. a) No claimant s own delaying conduct 2.The decision was taken without convening an oral hearing, despite the claimant having specifically requested one. a) No disputed fact requiring an oral hearing 3.The investigation was unfair because the complaint had been solicited by FOS and would not otherwise have been made. a) No the FOS has an inquisitorial jurisdiction Callard v FOS May 2013

41 Challenging FOS successfully The complainant accepted a FOS award for 100,000 and sued for the balance A complainant to FOS who accepts an award in his favour may not take further proceedings in Court to claim additional compensation, provided that the substance of his complaint to FOS is the same as the cause of action he seeks to advance in the proceedings. It does not matter if the complainant purports (when accepting the award) to reserve a right to litigate subsequently, or the complainant does not receive an award from FOS of the statutory maximum. Clark v In Focus Asset Management CA 2014

42 So in summary The three golden rules 1. Handle complaints fairly & effectively a) Proper systems, staffing & management oversight 2. Perform root cause analysis at every point 3. When dealing with the FOS a) You shouldn t be there too often b) Explain your position really carefully c) Use all available processes and procedures