Changes to the FCA's complaint handling rules: update for financial services firms
In July 2015, the FCA finalised its new rules on complaints handling, giving financial services firms more time to resolve complaints in a less formal manner.
The key changes, which largely come into force on 30 June 2016, are the product of a lengthy thematic review and consultation process by the FCA working alongside a number of major retail firms.
The FCA was eager to stress that the review was intended to identify potential changes to ensure that consumer interests are at the heart of complaints-handling rather than focussing on compliance with FCA rules. It is hoped that giving firms greater flexibility to handle complaints will mean that complaints-handling may be used as an opportunity to 'retain and enhance' consumer relationships. Whilst some of the changes relax the obligations on firms when responding to complaints, there are also new rules which are likely to cause firms additional burden.
So what are the key changes that firms should be aware of?
1. More time for firms to resolve complaints informally
The provision in the FCA Handbook dealing with the informal resolution of complaints (DISP 1.5) has been amended so that firms will have until close of the third business day to resolve complaints informally. Previously, firms only had until the close of business on the day after the complaint was received before they were required to follow the FCA's formal complaints procedure.
By allowing firms more time to handle less complex complaints, the FCA anticipates that it will be easier and speedier to resolve a greater number and thereby help avoid complaints being carried over to the more formal, eight week period.
If a complaint is resolved to the complainant's satisfaction by the close of the third business day, the firm need only send a 'summary resolution communication', rather than a final response letter. However, firms will now also need to report on complaints that have been informally resolved (see below).
2. Increased reporting obligations on firms that receive complaints
Previously, complaints resolved informally within the the one day period did not need to be reported to the FCA. From 30 June 2016, firms will now be obliged to send data to the FCA on all the complaints they handle, whether or not resolved within the informal three day period. This data will also be published by the FCA.
This change may mean that there is a substantial increase in complaints data for some firms after the first new reporting period. In order to provide some comfort to firms concerned about reputational damage, the FCA has announced that for the first reporting period, it will explain the data that would have been published had the old reporting system been in place.
3. The ability of consumers to refer a complaint to the Financial Ombudsman Service (FOS) even if it is informally 'resolved'
As previously noted, where a complaint is considered to be resolved within the three day period, the firm must send a 'summary resolution communication' to the complainant (new DISP 1.5.4). The communication must, as well as referring to the complaint and noting that the complaint is now considered to be resolved, inform the complainant that he or she still has the right to complain to the ombudsman if they subsequently decide they are dissatisfied.
The aim of this provision is to provide a strong incentive for firms to ensure that they handle complaints correctly the first time.
4. Prohibition of premium rate telephone lines
From 26 October 2015, firms will not be allowed to charge a consumer who has entered into a contract with the firm more than the 'basic rate' for the telephone call (new GEN 7). The FCA was concerned that premium rate telephone charges may have been acting as a barrier to complaints by discouraging consumers from contacting firms. The new rules will remove this obstacle and make it cheaper for consumers to complain.
So who do these changes benefit?
While the extension of time for the informal resolution procedure may lend assistance to firms handling consumer complaints, it is clear that the new rules are focussed on making it easier for consumers to complain. Nevertheless, firms should try not to view complaints handling in a negative light, rather, in the long term it will be to the advantage of both firms and consumers if complaints are used as an opportunity for firms to identify trends and improve their processes.