11th July 2011

Resources Compliance - Compliance Tip - July 2011

Complaints handling charges

This compliance tip is applicable to all authorised firms.

The FSA published CP11/10, their ‘Consumer Complaints’ consultation paper in May. This paper actually contains ‘made’ final rules relating to changes in the complaints handling (DISP) procedures and some associated matters as set out below.

Within CP11/10 the FSA have made final rules (following earlier consultation in CP10/21) which substantially amend the obligations on firms to provide customers with information regarding internal complaints procedures and the need to provide adequate mechanisms of redress or facilitate the process for customers seeking redress.

The rule changes to the DISP sourcebook are phased and come into force on the following dates:

1 July 2011

Changes to make clear that information about a firm’s complaints-handling procedures must be provided free of charge, and that the procedures themselves must be free of charge for complainants. These changes were required as part of the implementation of the UCITS IV Directive.

1 September 2011

Require firms to identify a single senior individual responsible for complaints handling. The existence of such a single point of contact will help FSA in their supervisory activity. FSA also believe that requiring the individual to hold a governing function will mean that they will have the necessary degree of influence within the firm.

Guidance to help firms operate management processes so that relevant learning from FOS determinations and published material are identified and cascaded to complaints handlers. Firms should have procedures in place, taking into account the nature, scale and complexity of their business. It follows that FSA would not expect a small firm which handles few complaints to have elaborate or expensive systems and procedures in place.

Require firms to keep records of analysis and decisions taken by senior personnel in response to complaints and additional guidance to help firms understand the processes they might need in place to meet FSA requirements on root cause analysis.

Advise firms to adopt proportionate measures to ensure that non-complainants who have also suffered detriment, or been potentially disadvantaged, are given appropriate redress. The guidance makes clear that FSA would expect any redress or remediation to be appropriate and proportionate given the circumstances of the particular case.

1 January 2012.

Increase of the maximum money award that the FOS may make from £100,000 to £150,000. FSAs stated reason for increasing the award limit is to maintain the degree of consumer protection afforded by the FOS in real terms. FSA also stated that they will review the limit periodically and adjust it as necessary to keep it broadly in line with inflation.

1 July 2012

Abolishes the two-stage complaints-handling process for firms, to encourage better process in customer complaints and improve consumer confidence. It was FSAs view that the two-stage process is inherently prone to misuse and FSA did have evidence of poor use, mainly by banks and insurers. Following the abolition of the two-stage process, the onus will be on firms to investigate complaints properly, rather than it being incumbent on customers to come back to firms if they are dissatisfied.

These new complaints handling rules are part of a package of measures to drive up standards within the industry and forms a key part of the FSAs intensive and intrusive approach to supervising how firms deal with their customers.

Key Action Points

Firms must be ready to implement these changes as and when necessary and have the required systems and procedures in place for the respective dates.

FSA have stated they “..expect firms to implement the necessary changes to their complaints-handling processes in line with the timing outlined in this paper. We will monitor this implementation through our supervisory activity”.

Help

If this is an area you would like further assistance with, or indeed if you have any queries on this subject please contact your usual Consultant or the Resources Compliance London office on 020 7422 7780.

Regulation, FSA/FCA