FSA: Poor complaint handling by banks

Five UK banks have been forced to undertake major changes to the way they deal with complaints; and two of those banks have been referred to enforcement for further investigation.

The action follows a review by the Financial Services Authority which found serious weaknesses in the banks’ handling of customer complaints, although the regulator declined to name the banks. The review looked at several banking groups responsible for over 70% of the complaints firms receive and report to the FSA and over 60% of those resolved by the Financial Ombudsman Service. Poor standards of complaint handling were found within most of the banks assessed. These included a lack of senior management engagement and accountability for the delivery of fair complaint handling. In addition, staff incentive schemes were poorly designed so branch staff were reluctant to pay redress to customers, even in situations where the bank was at fault. Complaint handling by staff in branches and call centres was of poor quality leading to inadequate investigations, poor decision making as to the outcome of the complaint and unsatisfactory correspondence with customers. Also, complaint handling procedures led to staff issuing multiple, repetitive responses to customers, forcing them to restate their complaint a number of times in the face of ongoing negative responses from the bank. The banks also failed to learn from previous complaints and make changes to prevent similar complaints arising in the future. Which? chief executive, Peter Vicary-Smith, said the FSA investigation underlines a sales culture in UK banks and the regulator should name the banks concerned. He commented: “This is another damning indictment of the banking industry, many of whose members consistently puts sales before customer service, and reflects the evidence consumers presented to the Future of Banking Commission. “Bonuses should be linked to treating customers fairly and the resolution of complaints, not to sales. What’s more, consumers have the right to know which banks the FSA is referring to its enforcement division. “If the UK’s banks want to win back the public’s trust, then they must fundamentally change they way they treat their customers.” The FSA did find examples of good and compliant practices in parts of some of the banking groups assessed, which demonstrates that it is possible for banks to handle high volumes of complaints and deliver fair outcomes for consumers. Dan Waters, the FSA’s director of conduct risk, said: “A culture of fair complaint handling is an important indicator of whether a firm is committed to treating its customers fairly. It is vital that customers know that if something goes wrong, their complaint will be dealt with in a reasonable way and that they will get a fair outcome. To assist all firms in meeting its requirements, the FSA has published a complaints handling file review template, to help assess if their complaint handling is achieving fair outcomes for customers. The FSA is also reviewing whether it needs to make changes to its existing rules on complaint handling and will be publishing its proposals in the third quarter of this year.