Complaints handling is set to become a major measure of your commitment to the fair treatment of clients, or TCF as it has become known.
The final proposals for implementation of changes to the General Code of Conduct reiterate this. There is now an official definition of what a complaint is:
“complaint” means an expression of dissatisfaction by a person to a provider or, to the knowledge of the provider, to the provider’s service supplier relating to a financial product or financial service provided or offered by that provider which indicates or alleges, regardless of whether such an expression of dissatisfaction is submitted together with or in relation to a client query, that –
- the provider or its service supplier has contravened or failed to comply with an agreement, a law, a rule, or a code of conduct which is binding on the provider or to which it subscribes;
- the provider or its service supplier’s maladministration or wilful or negligent action or failure to act, has caused the person harm, prejudice, distress or substantial inconvenience; or
- the provider or its service supplier has treated the person unfairly;
If you thought that having to act with “…due care and diligence…” was an opaque command, read this one again. Similarly the definition of a “complainant” allows for a very wide interpretation.
When the new code kicks in, you will be required to establish a complaints management framework, or hopefully adapt your current one, to very specific requirements, including record keeping which allows for monitoring and analysis and reporting complaints information as part of your market conduct report.
The proposed effective date is 1 January 2019.
Regulatory complaints handling
The latest FAIS Ombud Annual Report shows that new complaints received by the office increased to 10 846 from 9 891 in the previous year. Of these, 3 794 complaints (over 34%) were dismissed, 4 639 complaints (over 42%) were referred, and 592 complaints (over 5%) were settled. In addition, 1 821 complaints (over 16%) were carried over to the 2017/18 financial year.
This was achieved by 72 staff members. Personnel costs came to R29 264 029, an increase of 19.3% on 2015/16.
Of the total complaints received by the office of the FAIS Ombud, 8 433 (77.8%) were either dismissed or referred elsewhere. This must have had a huge influence on the ability of the office to fulfil its primary duty.
New Ombud structure
The current Financial Services Ombuds Schemes Council will be replaced by a full-time Ombud Council, headed by a Chief Ombud. The Ombud Council will establish a single point of entry into the ombud system which should see a huge improvement in productivity and speed up complaints resolution considerably.
The jury is still out about the exact structure, and three models are currently under consideration.
The discussion paper notes:
The Ombud Council is anticipated to be established alongside the Prudential Authority and Financial Sector Conduct Authority in 2018, and provisions relating to the ombuds system implemented thereafter.
Further steps identified:
- An updated review of the overall functioning and outputs of the ombud system is needed, looking to identify performance indicators and test each ombud and the system against these. A diagnostic into the functioning of South Africa’s ombuds system will be undertaken in 2018.
- Best-of-breed standards for all ombud schemes should be proposed, as part of the new Ombud Council’s work programme. These requirements will be issued as Ombud Rules by the Ombud Council. The Council should consider the processes and procedures that should be standardised, like complaints and referral practices, investigation powers, feedback times and methods, adjudication approaches, reporting, as well as the appropriate balance between principles- and rules-based standards. The findings of the diagnostic will be important in this regard.
- In 3-5 years a review of the impact of interventions should assess whether further corrective action is necessary, including through structural reform.
The discussion document gives no indication of plans to do something proactive with the information gleaned from a central database of complaints. The fact that more than a third of the complaints received by the FAIS Ombud were dismissed clearly points to an opportunity for consumer education.
It will be expected of FSPs to learn from complaints and take corrective action to prevent recurring problems. If the same does not apply to the various Ombuds, it might be viewed as a case of “Do what I say, not as I do.”