Complaints are proving to be increasingly costly, warns Bob Young, managing director of Capital Home Loans
There are major debates in the industry at present about the Financial Services Compensation Scheme (FSCS), the levies individual firms have to pay, the level of complaints we as an industry receive, how we ensure proper customer redress, how to decipher genuine complaints from those merely trying it on, etc – the list goes on. The sheer number of talking (and divisive) points merely show how important the whole issue of complaint handling is, and to my mind reveals that we are still some way from a system which treats both the complainer and the complained against fairly.
No one is suggesting that customers should have their right to complain taken away – this is fundamental and any firm that attempts to water down this inalienable right should not really be in the financial services business. However, we have reached a point where the costs associated with complaints for companies, be they just simply dealing with them internally, let alone levies, fines, compensation, etc, seem to be growing exponentially.
Now there is one school of thought that might suggest to the industry that if they had merely got their house in order then there would be fewer complaints to deal with and the costs would come down. But as we have seen in recent times, costs can rise regardless and firms that have had nothing to do with ‘scandals’ have had to effectively fund the sins of those who were culpable. I understand that the whole compensation scheme is a tricky puzzle to piece together, but I do have genuine sympathy for those who have been faced with sizeable levies when the problems have not been theirs in the first place.
It leaves a bad taste in the mouth and to a very real extent undermines what we should all be trying to do in dealing effectively with complaints. The recent complaint figures issued by the FSA highlight the growing number of mortgage complaints banks, building societies and lenders are receiving. Figures for the second half of last year reveal an increase in complaints about mortgage businesses up from 22,688 in the first half of 2010 to 29,274. Year-on-year comparisons reveal over a doubling of complaints received although at CHL we have seen complaints halve in the same period.
Although the number of complaints is important, of greater interest are the numbers of complaints that are upheld. We should all accept that some customers have their heads turned by the complaint handling companies or are likely to complain about anything regardless of whether there is any issue or blame to apportion. So, in terms of those complaint cases which have been closed and dealt with, 48% (11,907) were upheld. In my book that’s nearly half and given what went on, particularly pre-Credit Crunch we can’t really be surprised by that. From those upheld complaints, £15 million was paid out in customer redress, up from £5 million for the same period in 2009.
All in all it is obvious that complaints against mortgage businesses are on the rise while the bulk may be addressed against lenders, there will be broker and advisory practices that will also be seeing a noticeable increase in complaint levels. We have recently seen a number of claims management firms suggesting they are upping their presence in the mortgage market no doubt emboldened by the fines issued by the FSA for irresponsible lending practices. The claims management business is gearing up to take on all parts of the lending chain and brokers are unlikely to be spared.
The fact is that up until now most broker firms have probably seen a very limited number of complaints and, I would imagine, that they are not regularly going over their two free cases with the FSCS. This may change, and it may be particularly concerning for network AR firms whose two free cases are for the whole network not the individual firm.
It is apparent that the blame game exists and it could prove costly therefore, it is perhaps more imperative than even that we all have our complaint-handling processes in top shape. As compliant businesses we are no doubt following the rules however are we learning the lessons of our complaints and making sure we put those lessons back into the business to ensure we stop similar action from being taken by more and more customers? Any individual, firm, adviser can make a mistake – they can be costly however having dealt with them the real strength of a business will be to make sure the same mistakes are never made again.
