Regulatory fines – do they improve the way firms treat customers?


It gives me no pleasure to write about regulatory fines – it really doesn’t!  As a columnist, such sanctions are ‘low hanging fruit’ as far as article ideas go, but that is not the point.  I, and I guess the FCA too, look forward to a time when firms’ treatment of customers is at the centre of their thinking and fines are not necessary.  Sadly, having read the recent Barclays/Clydesdale Financial Services Limited fine decision notice, such actions are likely to remain until there has been a significant shift in corporate behaviours.

Maybe I am getting old (no comments please), but the regularity of such actions is beginning to make me think that firms might be making commercial judgments on the basis that the fines are just an ‘occupational hazard’ and it is cheaper to take the fine hit rather than suffer the training, system, processes and oversight costs ‘day in and day out’.  Maybe it’s cheaper than changing corporate and people behaviours?  Somebody, please email me and tell me I am wrong.  If my cynicism is not misplaced it not only means that TCF has failed it also means that SM&CR is equally unsuccessful.  That can’t be right, can it?

If my cynicism is not misplaced it not only means that TCF has failed it also means that SM&CR is equally unsuccessful.  That can’t be right, can it?

So why are my thoughts so jaundiced?  TCF should not be difficult – it is simply understanding customers’ needs and objectives and satisfying those needs.  Satisfying customers’ needs must surely be in the DNA of all customer facing staff and of those who are responsible for customer facing parts of any business.  Maybe it isn’t – and that is the root cause of these types of fines?

FOS say that regulated firms should ‘learn from’ their decision notices, but those decisions usually only look at individual cases and the issues are not very ‘searchable’.  Firms should also ‘learn from’ FCA fine decision documents.  In cases like this, where such a large fine has been issued (£26 million – after the early settlement discount), ‘learnings’ are very easily identifiable.  Often the Final Notice documents point to systemic failures.   Time is always well spent pulling them apart and considering any ‘learnings’ that flow from them.  At a high-level Barclays failed to:

  • follow its customers’ contact policies for customers who fell into arrears
  • have appropriate conversations with customers to help understand the reasons for the arrears
  • properly understand customers’ circumstances leading it to offer unaffordable, or unsustainable, forbearance solutions.

Whenever, I see headings such as these my immediate thoughts question the efficiency of the governance, controls and oversight.  Most regulated firms, in my experience, operate a three lines of defence model, but one has to question the effectiveness of such systems where the result is such a large fine.  In such circumstances one needs to ‘dig into’ the culture of the business – which brings me back to my original thought.

It can never be cost-effective to play roulette with compliance – the downside risk cost can’t justify playing loose with getting TCF right.  While the fines may be significant those amounts are trivial when compared to the reputational damage cost and the cost of redress, which in the Barclays case is currently estimated by the FCA at 10 times the net fine – ouch!  I really hope my cynicism is not warranted, but if it is I urge firms to rethink TCF in 2021.


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Partner - Baxters Business Consultants - a business consultancy undertaking marketing, training, freelance journalism and expert witness services to the residential mortgage lending, building society and financial service industry (April 1993 to date) -

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