Improving Internal Complaints Mechanisms

This article was first published in January 2015. In view of recent discussions about the importance of this function under the proposed new Market Conduct Framework, we republish it in abbreviated format to provide you with practical guidance on how to restructure your complaints handling processes proactively in anticipation of the new requirements.

TCF Outcome 6 states that customers should not face unreasonable after-sales barriers, including laying a complaint if deemed necessary. To demonstrate commitment to this TCF outcome, it is necessary for a financial institution to develop, implement, monitor and report on, an appropriate and effective internal process to manage customer complaints. In addition, firms are expected to use customer complaint information as an important source of management information to measure and improve their delivery of the full set of TCF outcomes.

Proposed new Complaints Management Processes

In November 2014, the FSB published proposals based on the outcome of a series of consultations, going back to February 2013, with the TCF Regulatory Framework Steering Committee. International standards and practices in relation to complaints management were also reviewed.

The preamble to the section on the envisaged Complaints Management Process (CMP) reads:

“All regulated financial institutions will be obliged to develop, implement and maintain a
complaints management process (“CMP”) that records in writing the institution’s
commitment to fair and transparent complaints handling, and its systems, processes and procedures for internal resolution of complaints. The CMP and the processes it sets out must be appropriate to the particular firm’s business model and the nature and scale of its products, services and customer base…”

The main features of the framework should include the following components:

  • A detailed description of the CMP which makes it clear to customers and employees how the system works and how, and by whom, it is maintained and overseen.
  • A simplified outline of the CMP that makes it quick and easy for consumers to understand who to contact, what is required from them, what the firm will do and any waiting periods.
  • Standards for record keeping and reporting, to make sure complaints are captured correctly and reported correctly. This will enable the conduct regulator to exercise oversight, and to require publication of complaints data in a manner that makes it possible for the financial sector to learn from customer feedback obtained through the CMPs.
  • Standards whereby financial institutions have to be able to demonstrate how they are monitoring, and learning from, customer complaints, including not only those captured by their own system but also from data published by the regulator on complaints handling throughout the financial sector.

The basic principles governing the relationship between the CMPs of individual firms and Ombud schemes are that:

  • Firms have to make information available to their clients at all stages of the service relationship about the Ombud scheme (s) to which the client has recourse in the event of a dispute not being resolved internally to a customer’s satisfaction
  • Firms should be able to demonstrate that their CMP includes a mechanism to analyse and learn from Ombud rulings.

The framework proposes ways in which complaints management can be embedded in the current regulatory framework for different types of institutions, until the FSR law is in place, for example through the Policyholder Protection Rules (PPRs) for insurers. Industry engagement on the proposals will inform the final approach.

A copy of the Complaints Management Discussion document contains comprehensive details of what is discussed above.

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