Regardless of what happens to the regulator, Treating Customers Fairly should be embedded throughout your business, argues Bob Young, managing director of Capital Home Loans
For any financial services business the issue of complaints, the process that goes into dealing with them and how they are handled should never be too far away from your thinking. Any business which says it is not bothered by the complaints it receives is either naive or foolish because customers provide fantastic feedback that can save you a small fortune.
The importance, and rise, of complaints was brought home by some recent figures from the Financial Ombudsman Service (FOS) which revealed an increase in complaints against financial services providers by both individual consumers and small businesses in the year up to 31 March 2010. Consumer complaints increased by 27% over the year to 158,356 while small business complaints rose to 4,656, 43% up on a year ago and largely in part due to the continuing struggles that many firms are experiencing in relation to gaining business loans.
The first point that struck was the sheer number of complaints that FOS is now dealing with. In years gone by the industry has run various campaigns in order to outline the complaints process for consumers. It was once thought that there was little knowledge about FOS and how it handles complaints but regulatory changes and greater transparency around the sale of products has resulted in a much more knowledgeable public and one which is certainly not afraid to level a complaint.
This point can be seen by some statistics from FOS for the 2009/10 financial year when it resolved a not insignificant 166,321 disputes – an increase of 46% on the previous year and 50% of those cases resulted in compensation for the consumer. Alongside this it handled over 925,000 consumer enquiries which works out at 3,500 each per working day – a quite staggering number. All in all the biggest increases in disputes were seen in the insurance area which increased by 38%, banking and credit complaints increased by 30%, investment complaints remained static while both pension and motor insurance complaints fell by 13% and 27% respectively.
The point is that complaints are an everyday part of financial services and consumers are much more knowledgeable about their rights and the process they need to go through in order to complain in the right way. With this being the case, all advisory businesses should have in place the right processes themselves from start through to finish in order to keep complaints to a minimum but also, rather importantly, to have the paper trail and customer contact clearly evidenced at every stage.
In this regard, treating customers fairly – remember that? – can be a vital component of any complaints process and procedure regardless of what the complaint is or the nature of your business. As a mortgage lender we have completely embedded the TCF principle within the business in order to hopefully keep complaints to an absolute minimum but also to ensure that when complaints are made we can be totally transparent about our own actions and also so we can communicate clearly with both the customer initially and FOS if the customer wants to take their complaint down this route. How seriously do we take complaints? Every single complaint, no matter how trivial, is reviewed by senior executives including me, the MD.
This undertaking shows a real commitment from CHL however the rewards of both satisfied customers and a small numbers of complaints are deemed to be worth the effort. So, what of the nitty-gritty in terms of complaint numbers and performance well in the last 18 months CHL has had just 20 cases go to FOS with only three cases going against us.
These figures hold up particularly well when compared with some of our competitors and particularly the larger lenders. Latest statistics from FOS only relate to July 2009 to December 2009 – a six-month period. In that period ‘mortgages’ were the fourth most complained about product in terms of new FOS cases, behind PPI, current accounts and credit cards. The FOS statistics for individual businesses only highlight those where the Ombudsman received 30 new cases and resolved at least 30 cases so CHL does not appear. However, Bank of Scotland had 561 cases with 34% resolved in favour of the consumer for Barclays the figures are 486 and 56% C&G had 179 cases with 36% resolved in the consumer’s favour. Specialist lenders are not immune: Mortgage Express had 94 new cases with 25% resolved and GE Money had 56 cases with 67% resolved against.
Advisers may think it is unlikely they will see these sorts of numbers complaining against them, however none of us are fortune tellers and the future is anyone’s guess. Who is to say what may become the next big mis-selling scandal? Who can honestly say they foresaw what would happen with endowment mortgages? The point is that TCF should be embedded within everything the firm does, be it the sales and advice process or the way it handles and deals with complaints. A complete audit trail is vital as is total transparency about what your firm offers, how much it charges, why the recommendation is made, etc, etc – the list goes on.
This is a fundamental area but one which still goes unheeded by some firms. Regulation has ensured a certain degree of standardisation in process but we are clearly seeing a much tougher regulator and a much more informed consumer which could spell trouble for some firms who are not fully engaged with treating customers fairly. Regardless of what happens with the regulatory system and institutions TCF principles are still worthwhile and they can certainly prevent unexpected and unwanted complaints further down the line.
