It is that time of the year again when the Financial Ombudsman Service release its half yearly complaints data, and this release is no less interesting than previous announcements. It appears that there is a clear shift in the landscape and a lot for regulated firms to take on board.
FOS data watchers will no doubt be happy to see the continuing fall in PPI complaints – especially as the fall is attributed to “more customers are getting fair outcomes from their PPI providers, following our significant engagement with these firms over the last few years”. This clearly shows that firms are learning, as they should, from FOS guidance and decisions, and consumers are getting the redress they deserve without the delays and hassle of taking their case to the Ombudsman.
The number of complaints upheld, in non-PPI matters, is low and is also falling. The uphold rate excluding PPI is now 39%, which has been falling over a number of quarters. Consumer enquiries are also falling. This, in my view, generally shows two things; 1) customers are receiving final notices from providers which they consider fair, and the customer is then not taking the issue any further and 2) firms are making final decisions that are correct and FOS then supports that decision. As far as compliant complaint handling goes, positive progress.
The reducing FOS numbers is positive, however, there are areas of concern,
The reducing FOS numbers is positive, however, there are areas of concern, where firms need to work much harder to ensure appropriate customer outcomes. The now most complained about product is guarantor loans. Complaints either come from the borrower who typically complains about ‘affordability’ (or the lack of it) or the guarantor who typically complains they were pressurised into being a guarantor. Shockingly one guarantor lending firm accounted for more than 16% of all banking and credit complaints.
What do guarantor lending firms need to do (and some of this applies to all regulated firms whatever their core products), when high numbers of complaints are received:
- Undertake a root cause analysis – with external assistance if internal staff do not have the ability or independence to do it effectively.
- Most fundamentally – firms must learn from previous FOS decisions – this is not a new FOS suggestion but why would firms not take the trouble to learn from past decisions. In my experience not many firms search the FOS database to review previous decisions – they should start.
- Reappraise ‘affordability’ models and learn from past borrower performance – the affordability index v probability of default analysis is out of balance where guarantor loan complaints are concerned.
- Adopt independent oversight of models, decisions and policies – as it appears ‘lines of defence’ as high levels of complaints suggests these procedures are either ineffective or broken.
- Review treating customers fairly policies – especially forbearance procedures as these have evolved in recent months.
- Undertake a ‘culture audit’ – where high numbers of complaints originate from business function the culture of that area should be questioned – either the original policies were simply wrong, or staff do not know how to (or are not allowed to) treat customers fairly.
While FOS complaints data is showing positive signs of improvement, there is still a lot of work to be done. No wonder then, that the FCA is ramping up their oversight of regulated product provider firms and CMCs who still manage a significant number of FOS complaints. Get ready for further reviews of your firm’s culture, at all levels, whether it be senior management function level, material risk taker level or certified staff level. The FCA will change behaviours – whatever it takes!
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