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FCA concerns around consumer credit firms’ handling of complaints

This week, the FCA wrote to CEOs of consumer credit companies to express concerns about firms’ handling of complaints. This follows a review of how consumer credit firms approach and deal with customer complaints in which they found examples of material non-compliance and “other concerning practices”.The FCA’s main concerns were:

  1. A failure to provide customers with the required information about the Financial Ombudsman Service (FOS), including failing to provide details of the complainant’s right to refer the complaint to the ombudsman;
  2. A failure to provide the complainant with a clear explanation of the outcome of the complaint and why this outcome had been reached;
  3. A lack of management controls in place to analyse and remedy the root causes of complaints.

The regulator found that, of the sample of websites they reviewed, a quarter had either no or inadequate information about how to make a complaint, and half did not include the required reference to FOS. Where information was provided it lacked basic information. A fifth of firms indicated that the operated a two-stage process where customers’ dissatisfaction with a complaint would be reviewed internally despite this being prohibited by the FCA’s “Dispute resolution: Complaints” (DISP) rules.

The FCA expressed dissatisfaction about the quality of responses, including the level of clarity as to how the complaint had been investigated, whether it was upheld, and the grounds for tuning it down. A third of responses failed to include required information such as time limits, the website address of FOS, the FOS leaflet, or the fact that the complaint service was free.

It also expressed concern that ex gratia payments were being used to substitute for proper complaint investigation. This was one reason why they believed firms might not be properly analysing and learning from the causes of complaints.

Finally, they felt that firms may be failing to record and report complaints data accurately, despite this being a requirement since 30 June 2016.

The FCA expects firms to review how they identify, record and deal with complaints and how they communicate with customers. Firms must be able to evidence compliance with regulations if and when the regulator requests them to do so.