A recent publication by The Financial Ombudsman Service (FOS) highlighted complaint volumes and upheld rates at an institutional level. It's clear there are significant disparities between what Financial Institutions believe are fair outcomes for consumers and what the FOS interprets as a fair outcome.
Regulated firms are required to report the volume of complaints they handle to the FSA, and the numbers upheld in favour of the customer. Whilst volumes were fairly consistent between 2006 and 2009, the percentage upheld rate has dropped from 49% in the first half of 2006 to 38% in the same period in 2009. Correspondingly, the number of consumers unhappy with the outcome, and who subsequently refer the matter to the FOS has increased dramatically. In 50% of these cases the decision of the Financial Institution has been overturned in favour of the customer. If this trend continues, the volume of complaints referred to the FOS will double over the next two years with fees paid to the Ombudsman likely to be over £100m by the end of 2012 by the banking industry alone.
It is no wonder there has been a wave of negative Press Headlines in recent weeks:
"Complaints against bailed-out banks soar"
"Record complaints shame High St banks"
"Banks face massive fines for poor service"
The data prompted the FSA to investigate several banks. Early indications are that at least two are facing significant fines for not "Treating Customer Fairly". The FSA warn other banks could face fines if improvements are not made by the end of 2010.
The FSA found:
• More than a third of complaints were not investigated properly.;• Poor decisions were made on 18% of complaints.;• Evidence of inadequate compensation was a regular theme;• Evidence of poorly trained staff;• Customers were kept waiting for months with no resolution;• Standard letters were sent to customers time and again, increasing their frustration;• Senior managers failed to take responsibility for fair complaints handling;• Banks failed to learn from previous complaints.
FSA Director, Dan Waters, advised that a culture of fair complaints handling is an important indicator of a firm's commitment to treating its customers fairly. Clearly, there is current evidence of unacceptable standards of complaints handling in banks.
More gloom can be expected. By August 2010, each Financial Institution will be obliged to publish the volume of complaints received, the cause of the complaint and number of complaints upheld. For the first time, consumers, the press, consumer rights organisations and claim management companies will be able to compare institutions and gain a real insight into a firm's character and ethos in relation to how it treats its customers in comparison to what it says. Expect more naming and shaming in the months to come!
At Bluerock we firmly believe it's time to get things in order by putting processes in place to significantly reduce the number of complaints referred to the FOS, this results in a saving of £500.00 + VAT per complaint, reduces the number of cases upheld by the FOS and demonstrate the firms commitment to "treat its customers fairly". Thus a real competitive advantage is gained by using the information obtained through the complaints process to drive improvements that benefit consumers and add real value to the bottom line by reducing costs and adding to market share.