New financial complaint rules announced in UK

The UK’s Financial Services Authority (FSA) has announced new complaints handling rules as part of a package of measures to drive up standards within the industry. Under the new rules the Financial Ombudsman award limit is raised to £150,000.

It means the abolition of the two stage complaints handling rule to make sure firms resolve complaints fairly and do not dismiss them the first time, requiring persistence from the customer to pursue the complaint.

Under the rules firms will be required to identify a senior individual responsible for complaints handling and the FSA has issued additional guidance to help firms understand the processes they might need in place to meet FSA requirements on root cause analysis.

There is also further guidance requiring firms to take account of ombudsman decisions and previous customer complaints and the FSA confirmed that the limit on awards made by the Financial Ombudsman Service will increase from £100,000 to £150,000.

‘We would rather customers were not put in a position where they had to complain, but when they do we want them to be treated fairly by their firm, with their complaint resolved promptly and being provided with redress when needed,’ said Sheila Nicoll, the FSA's director of conduct policy.

‘Good complaints handling contributes to customer loyalty and should provide the opportunity for firms to put right problems in product design or sales before issues become widespread. But we have found major failures with the way firms handle customer complaints and have since taken enforcement action against two firms as a result of poor complaints practices,’ she added.

Complaints handling forms a key part of the FSA's intensive and intrusive approach to supervising how firms deal with their customers. Since 2009 the FSA has published aggregate complaints statistics so that customers can see the volume of complaints being received by firms. In September 2010 the FSA also started to publish firm-specific complaints data, enabling customers to compare and contrast the way different firms deal with their complaints.

Just last week, the FSA announced a fine for Bank of Scotland of £3.5 million for failures related to complaints handling of its retail investment products. This is the second firm fined following the FSA's review of complaint handling practices by five major banking groups. Royal Bank of Scotland and Natwest were fined £2.8 million in April 2010 for multiple failings in the way they handled customers' complaints.

Adam Scorer, director of external affairs at Consumer Focus, said the announcement is good news for consumers. 'This is an industry with confusing products and an appalling record for mis-selling. It feels designed to generate problems for its customers. To require customers to endure a drawn out and unresponsive complaints process is bad for companies and bad for consumers,'[ he expalined.

'Companies deny themselves crucial insight into what they are getting wrong and consumers need herculean powers of resilience and determination to get a problem sorted out. These changes are welcome and should be implemented with vigour,' he added.