FCA Consumer Duty Complaints Review: Key Findings on Governance, MI and Reporting

The FCA’s first review of complaints since the Consumer Duty has cast doubt over the effectiveness of firms’ governance, management information, and root cause analysis. While the regulator identified some areas of good practice, its findings demonstrate that many firms need to improve core elements of their approach to complaints handling.

Key findings from the FCA’s consumer duty complaints review

The FCA reviewed complaints and root cause analysis within a sample of 40 firms, including businesses of different sizes and a range of sectors.

Below is a summary of the key findings from the FCA’s review:

How firms can strengthen consumer duty complaints handling

1) Strengthen complaints handling policies and procedures

Building on the above, firms should provide staff with the guidance and tools required to effectively identify and handle complaints. This should be clear and simple, with a specific focus on defining what material distress and inconvenience means to your firm, what monetary loss includes, approaches to root cause analysis and governance.

It should also include a remediation framework to ensure consistently fair outcomes are achieved. Policies and procedures should reflect how you’ve assessed what the Consumer Duty means to how you handle complaints. This must involve defining:

what prompt acknowledgment of complaints means

how you approach keeping complainants appropriately informed throughout the handling of the complaint

how you ensure and monitor good customer outcomes are being achieved

This should be evidenced through a recent refresh or update to internal policies and procedures.

2) Maintain a skilled and resourced complaints team

Define who specialises in the products, activities, and services your firm undertakes, while also adhering to the FCA’s dispute resolution rules (DISP). The complaints team should retain up-to-date knowledge of the Financial Ombudsman Service's (FOS) approach and response to complaints of a similar nature to those received.

When reviewing complaints, the team should act impartially and adopt the FOS’s approach of reviewing complaints based on what is fair and reasonable in the circumstances of each complaint.

You should also provide staff with robust and tailored complaints training, aligned to their role. This training must provide staff with the required knowledge and skills to effectively identify, handle, process, and administrate complaints.

3) Establish quality assurance for complaints handling

Whilst your complaints team specialises in complaints, your firm’s products and services, and the associated DISP rules, it’s important to have controls and systems in place to monitor their output.

For example, a complaints team manager, dedicated first-line quality assurance team, or second-line assurance team should monitor whether processes are being adhered to and that consistent and correct outcomes are being achieved for customers.

4) Improve complaints management information and controls

Do internal complaints handling systems make it possible to collate detailed MI? Who compiles the data and what controls are in place to provide assurance that the data is accurate?

Staff need to be trained to accurately administer complaints, for example accurately identifying the proximate cause of a complaint (primary category) and sub-categories (secondary categorisation for root cause analysis).

In-depth MI can be achieved in various ways, including the creation of dashboards which link complaints data such as:

• complaint volumes (including vulnerable customers)
• complaint outcomes
• number of complaints resolved within three days
• number of complaints resolved within eight weeks
• number of complaints resolved after eight weeks
• redress paid
• complaints forwarded
• FOS complaints and outcomes
• external data (e.g. social media feedback)
• quality assurance outcomes
• All of the above should link back to the key pillars of Consumer Duty and its expected outcomes. More mature approaches may also include data relating to expressions of dissatisfaction that were not formally classified as complaints but could still indicate areas for improvement.

5) Strengthen complaints governance arrangements

At which sub-committees, committees or executive meetings is complaints data presented? Is complaints data and detailed analysis presented clearly and prominently at sufficient governance fora to appropriately inform management and senior management of complaints performance, trends and areas for improvement?

6) Demonstrate effective root cause analysis and remediation

This can be achieved through implementation of action plans that include:

• clear action instructions
• identified owners
• update deadlines
• closure deadlines

Upon completion, action plans should document in detail what changes or amendments have been made, including any monitoring systems introduced, and how the changes have contributed to delivering good customer outcomes in line with Consumer Duty.

7) Conduct reviews of complaints-related changes

Following identification of trends or issues, it’s not enough simply to make changes or improvements. Firms should understand and document how those changes have delivered the desired results.

For example, conducting post-change or post-improvement reviews will help determine whether the improvements have achieved the intended outcomes.

8) Enhance FCA complaints reporting processes

You should have a primary RegData account holder and secondary RegData users to avoid sole dependency on one individual.

Verify that the team or individual responsible for compiling complaints data is appropriately qualified, supported by a robust quality assurance process to ensure accuracy. For example, firms should ensure that those collating the data can review and interpret it effectively, combined with documented approval and sign-off processes.

How Ocorian supports consumer duty complaints governance and reporting

Our dedicated team regularly advises firms across a wide variety of financial services sectors, including wealth management, investments, pensions, mortgages, insurance, consumer credit, and funeral planning.

Our specialists combine industry and sector expertise with a detailed understanding of how both the Financial Ombudsman Service and Financial Conduct Authority operate, helping firms identify an approach that is appropriate for their business.

Reach out if you’d like to discuss any of the topics mentioned above or if you require tailored support.

Author: Stephen Edmonds