FCA review recommends wider complaints definition

Recommendations from a working group on the back of a regulatory thematic review could see the complaints net widened by removing a requirement for damage or distress to be “material”.

A review of 15 firms by the Financial Conduct Authority found all have a wider definition of what a complaint is than is specified in dispute resolution rules due to confusion over what ‘material’ means, but that this leads to inconsistent application.

As one of six recommendations, the working group, made up of the 15 firms and bodies including the Financial Ombudsman Service, has proposed to reconsider the definition of complaint by removing the “more subjective element” of ‘material’ distress or ‘material’ inconvenience.

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The working group also recommended to remove the ‘non-reportable’ complaints element of the next business day rule so that firms would report all complaints received, but it would also extend the period where an informal process could be applied to one week.

If a complaint is resolved by the end of the next business day, FCA rules do not require firms to issue a written response informing customers of their rights to refer to the Fos.

The review aimed to uncover barriers to effective complaint handling in firms and, where found, to work with industry to propose solutions. The 15 firms selected comprised of seven banks, two building societies, three general insurers and three life insurers.

Other recommendations are:

• dedicated complaint telephone lines should not use numbers that charge consumers more than a ‘basic rate’ (including mobile users);

• review the biannual complaints return to include more consumer-centric measures; and

• revise the FCA complaints publication, for example including more consumer-centric measures and contextualised data.

The FCA added that all firms should consider how the findings relate to their own complaint-handling operating models, policies and practices.

Clive Adamson, director of supervision at the FCA, said: “It’s in everyone’s interest to consider how to make complaints handling more effective; that’s why it was important to us to work collaboratively with industry on this project and I would like to thank the firms for participating.

“Together we have identified improvements that should be made and firms will act on these findings. I hope those firms who weren’t part of the review will consider the recommendations and take appropriate steps to deliver consistent outcomes for consumers.”

Simon Morris, partner at law firm CMS, added: “Complaints are a constant regulatory focus but what is remarkable about this FCA paper is that it is the outcome of a consensual process

“Rather than shout through a megaphone, the FCA has sat down with firms and customer representatives to work out how to make things better. All stakeholders will welcome the measured and constructive output and also the FCA’s recognition that working with the grain of the market can bring positive results.”

The regulator is now conducting further research in light of the recommendations, with a view to developing policy proposals, which it said it expects to consult on “soon”.