Megan Ho

Under the new Consumer Duty, Principle 12 states, ‘a firm must act to deliver good outcomes for retail customers’.

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Implementing the new Consumer Duty has enhanced the level of consumer protection, but it has also widened the possibility for customers to raise complaints with a firm. It is therefore foreseeable that the number of complaints may increase.

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The FCA has published guidance and requirements for firms to comply with in terms of dispute resolution for such complaints. This article will cover how firms should handle complaints and dive deeper into the requirements.

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What is a complaint?

According to the FCA Handbook, an extended definition of a complaint is provided. It can be broken down into the following:

• any oral or written expression of dissatisfaction, whether justified or not,
• from, or on behalf of, a person
• about the provision of, or failure to provide, a financial service, claims management service or a redress determination, which:
• alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience; and
• relates to an activity of that respondent, or of any other respondent with whom that respondent has some connection in marketing or providing financial services or products or claims management services, which comes under the jurisdiction of the Financial Ombudsman Service.

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Expression of dissatisfaction from or on behalf of a person

A complaint can be any oral or written expression of dissatisfaction. This suggests a wide application, especially when the FCA does not require the complaint to be justified. Further, this expression of dissatisfaction could be raised by anyone or on behalf of someone. Supplementing this with a further requirement in the FCA Handbook (DISP 1.3.2), which states that complaints can be made by any reasonable means, highlights the many ways a complaint can be made. This implies that dissatisfaction expressed through informal routes such as social media would also be viewed as a complaint. This has been confirmed by the FCA representative interviewed for research reviewing good practices in complaints handling procedures and guidance.

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About the provision of service

Whilst the scope for how a complaint is made and who can make it is wide, the area for what customers can complain about is no different. Complaints can be made about how a financial service, claims management service or a redress determination was provided.

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Financial loss, material distress or inconvenience

Additionally, the complainant must have suffered financial loss, material distress or material inconvenience; and the complaint must relate to an activity of the respondent. As long as the complainant has suffered financially, emotionally, or has been inconvenienced, they can complain.

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How quickly should complaints be handled?

Under DISP 1.6 of the FCA Handbook, the complaints time limit rules state the following. In general, after receiving a complaint, the respondent must send the complainant a ‘final response’ by the end of 8 weeks after receiving the complaint. A ‘final response’ is a written response where the complaint is accepted, and redress is offered; or redress is provided without the acceptance of the complaint; or the complaint is rejected. There is an exception to this. If the complaint is from an electronic money holder (EMD complaint) or a payment service user (PSD complaint) about a financial service, then the ‘final response’ must be given by the end of 15 business days after the day the complaint is received.

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The FCA incentives a prompt resolution of complaints by exempting complaints that are resolved within 3 working days from specific complaints handling requirements. For example, rather than having to send a detailed response letter, the respondent is only required to send a summary resolution communication. Further, they are exempted from complying with the complaints time limit rules and complaints forwarding rules.

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What are the requirements for complaints reporting?

Respondents must submit a complete report twice a year with regard to the complaints they receive. Exempted respondents who only have to submit a comprehensive report once a year are firms which have permission to carry on only credit-related regulated activities or operate an electronic system in relation to lending and have revenue arising from these activities that are less than or equal to £5,000,000 a year. Firms carrying on regulated claims management activities and regulated funeral plan activities also only have to submit a report once a year. The FCA provides forms in the Annex for which the format of the report should be set out as.

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Now what?

Understanding the requirements that the FCA has provided for handling complaints is the first step. It is projected that more complaints will be raised with the implementation of the new Consumer Duty, thus, it is important for firms to equip themselves to handle a large influx of complaints.

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The following are issues that firms may encounter when dealing with customers.

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Inconsistent communication

Customers who issue a complaint are not looking for trouble; they would like to get their problem resolved as soon as possible. However, the primary cause for complaint escalation is when customers get frustrated after repeating their issues to several different representatives. This could be due to the communication style and language being inconsistent. It must be understood that there is no ‘one size fits all’ in complaints handling. Different customers will have different levels of education and technical understanding. Even when two customers experience the same issue, the same reply cannot be issued.

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Deriskly utilises advanced AI/machine learning technology which can help firms handle complaints in relation to the Consumer Duty. Deriskly can automatically generate a range of ‘smart replies’ based on a nuanced analysis of customer interactions. Each response would be tailored to the particular problem the customer is facing, using language that the customer would understand. Deriskly can also analyse the interaction between the customer service team and the customer, highlighting customer relationships that are at risk of escalating into a dispute. This will allow the customer service team to take action before further escalation occurs.

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Undue delays

The FCA requires firms to send a ‘final response’ within 8 weeks of receiving the complaint. This does not mean that firms have to sit on the complaint until the 8th week to reply. The quicker the reply, the less likely the complaint will escalate as the customer will feel heard. Compare a customer who might have their complaint resolved within a week to another who might only get a response after 8 weeks. The first customer will be unhappy for less than a week, but the latter customer will have the opportunity over the 8 weeks to spread how ‘terrible’ the company is at handling their complaint. This will undoubtedly impact the company’s reputation negatively.

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The aforementioned smart replies function Deriskly offers does not only align the language utilised in replying to complaints. Its automatic reply would also mean that customers will quickly get a response. This means the complaints handling cycle would be shortened and streamlined, giving customers less time to spread their accusations against the company.

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Identifying vulnerable customers

The FCA has published a Guidance for firms on the fair treatment of vulnerable customers. This guidance sets out how firms should comply with their obligations under the new Consumer Duty to ensure they treat customers in vulnerable circumstances fairly.  It is important for firms to correctly identify vulnerable customers and treat them in line with the guidance. However, when faced with a large influx of complaints, it may be difficult to do so.

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Deriskly offers a function where customer correspondences can be summarised into key issues for the customer service agent. This would prevent the situation of scrolling through long chains of conversations from arising, enabling better management of correspondences, and ensuring that vulnerable customers will not be overlooked.  Moreover, Deriskly can accurately categorise complaints, which would further aid with the management of complaints.

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Conclusion

In order to get ahead of complaints handling, firms should implement new technology solutions such as the one Deriskly offers to improve compliance with the requirements and guidance set out by the FCA. The new Consumer Duty will be fully in force by the end of July 2024, therefore, it is imperative that firms not only understand the requirements of dispute resolution but are also able to handle them effectively.

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