ABI Response to FCA Consultation Paper: Improving Complaints Handling (CP14/30) The ABI is the voice of insurance, representing the general insurance, protection, investment and long-term savings industry. It was formed in 1985 to represent the whole of the industry and today has almost 350 members. The ABI welcomes the opportunity to respond to the FCA s Consulation Paper on Improving Compaints Handling and we look forward to the FCA s policy statement. Consultation Paper Response 1. Do you agree that the time period for firms to resolve complaints informally should be extended from the close of the next business day to three business days (following receipt)? The ABI agrees with the FCA that dealing with a complaint less formally has numerous advantages for both firms and consumers. By extending the timeframe, this will allow less formal complaints to be handled more quickly and efficiently without the time pressure. In many cases, complaints can be easily resolved at a branch or first contact level without expanding into a formal process. Very often consumers themselves are not looking to have a complaint dealt with formally as they simply want the issue to be resolved promptly and effectively. While we support extending the next business day rule, we think that five business days is more appropriate as this will fully realise the benefits for firms and consumers. Five business days is more appropriate and would enable a far greater number of less complex complaints to be dealt with to the benefit of the consumer. Furthermore the FCA s consultation mentions under paragraph 2.6 that in certain circumstances firms end up chasing customers due to the pressure to resolve the complaints within the short time frame. The longer period of five days will ease that pressure Therefore by extending to five business days instead of three, firms will have sufficient time to appropriately deal with more complaints without the need to chase customers or go down the formal process. 2. Do you agree that firms should report to us, and publish all complaints that they receive? The ABI agrees with the reporting of all complaints. We support the FCA s aim in introducing this requirement to enable them to make a more accurate comparison between firms on the number of complaints they receive. For this, however, to be an effective measure and enable comparison there needs to be consistent reporting. We are concerned that the definition of a material complaint is subjective and open to interpretation both by individual members of staff and firms. This means that Page 1
however robust staff training is, FCA reporting risks being inconsistent and therefore limit meaningful comparison. According to the consultation paper the FCA would anticipate introducing these changes in March 2016. This is a very tight deadline for firms to introduce and implement these new requirements. Firms will need to introduce and test new systems as well as ensure that their staff are adequately trained to use these new systems. Under paragraph 2.16 (page 11) the FCA states that they expect implementation of the reporting rule changes to take approximately two years from the policy statement for the FCA and firms. However this two year implementation time scale is contradicted in the following sentence with changes being introduced by March 2016. This implementation date does not sufficiently take into account all the significant system changes that firms will be required to make to enable them to accurately report all complaints to the FCA. Furthermore this proposed implementation date falls in the middle of the H1 2016 complaint reporting period. This will require firms to operate two methods of reporting for the H1 2016 complaints report. Whereas a two year implementation date from the policy statement is a much more realistic timeframe that will enable firms to successfully implement the changes and ensure that internal systems have been appropriately tested and staff adequately trained. Reporting all complaints will also require careful explanation to customers by the FCA to avoid them drawing simplistic conclusions. This will need very careful positioning as the resulting release of materially higher complaint numbers into the public domain may (at least in the short term) negatively impact consumer confidence in the financial services industry. It would also be helpful for the FCA to produce guidance on this issue and perhaps suggested wording for firms websites. We look forward to working closely with the FCA on this and hearing how the FCA plan on communicating these changes to consumers. 3. Do you have any comments on our proposals to improve consumer awareness by requiring firms to send a summary resolution communication in respect of complaints handled with three business days? We agree that consumers must be given the information that they need about the complaints procedure and the options that they have available to them. However we do not feel that this is addressed with the summary resolution communication and strongly disagree with this proposal. We are concerned that this could potentially be very confusing for customers to receive a written communication when their complaint has been resolved over the phone. The referral to the FOS could potentially add to that confusion, especially when they believe their complaint has been resolved. Therefore while this communication is intended to be a generic statement, it may push customers into a formal process. There is also a risk that front-line staff will be focused on the process itself rather than the appropriate customer outcome. This may result in consumer detriment and in front-line staff being deterred from making a Page 2
decision. This could lead to complaints being escalated to the specialist complaints team and therefore delaying the response to the customer. Instead of having a formal written statement, a possible alternative would be to communicate the summary resolution communication verbally. Customers will at this point be told about the more formal internal complaints process that is available at the firm level and at the same time provided with information about FOS. This would do two things; raise awareness of the FOS and also let customers know that there is a more formal internal complaints process available. Furthermore the firm could offer sending this information in a written format, if the customer wishes. The information that is necessary to be provided verbally can be prescribed and firms would be required to put in place robust controls to monitor adherence to the requirements. There is already some experience of firms being required to provide information verbally to complainants. The Irish regulator, the Central Bank of Ireland require, as per their Consumer Protection Code (CPC 2012) part 10.8, that when a regulated entity receives an oral complaint, it must offer the consumer the opportunity to have this handled in accordance with the regulated entity's complaint process. So what this means in practice, is that complainants who complain verbally must be offered the opportunity to have their complaint handled through the formal process, where they would then receive a written acknowledgement and final response letter. So whilst the complaint can be resolved over the phone the availability to have it handled in the formal process must be explained and offered to them. Firms would like the opportunity to deal with complaints again if a customer, after consideration, is not satisfied with the firms initial response. This is not made sufficiently clear in the consultation paper as it has been interpreted that they will not have the opportunity to do this. Furthermore, under section 2.25 (page 13), it is mentioned that there is a risk that many consumers are vulnerable to pressure from firms to accept a resolution to a complaint which is not in their best interests. While we are not sure what evidence there is to support such a statement, by informing customers of the more formal internal process this should help counteract that risk. 4. Do you have comments on the proposed new complaints return? The changes that are proposed in the complaints return will have significant cost implications for firms, as changes will be required to the systems used to record complaints. Specifically in regards to the complaints return, it is necessary to ensure that the product categories are broad enough to ensure the collection of consistent and accurate data. However the new categories proposed in the consultation paper do not apply to general insurance. Furthermore the other category is not appropriate to capture general insurance complaints. Otherwise we support the FCA s proposal to provide guidance on what is meant by each of the complaint categories as they are introduced, as this will be useful for firms. Clear guidance should also be extended to existing terms. We also support Page 3
the proposal to provide a simplified complaints return for firms receiving less than 500 complaints. 5. Do you agree with our proposed approach to data contextualisation? In principle we agree that contextualising complaints could be beneficial as it will allow consumers to make informed buying decisions and greater transparency. However the cost of contextualising this data must not outweigh the benefits. Furthermore there needs to be a clear set of principles, otherwise contextualisation could lead to additional confusion and complexity for anyone attempting to interpret the data. For firms it would be essential to have clear guidance provided. This is especially useful for types of businesses that use block policies and have the potential to have a mixture of eligible and ineligible customers. So for e.g where the policyholder is a local authority and there may be a number of leaseholders/potential eligible complainants. 6. Do you have any comments on the new complaints publication report? The ABI generally agrees with the new complaints publication report, however as stated in our response to question 2, clarity of a definition of a complaint is critical. Furthermore we believe the contextualisation of data should be provided below the table in a free form format as this will aid consumer understanding. 7. Do you have any comments on these changes? No Comment. 8. Do you agree that all post-contract telephone calls to financial services firms should be charged at no more than a basic rate? In light of the changes that have been made in other sectors and the need to be fair to consumers, we support post-sale calls being charged at no more than the basic rate. However the implementation date (Summer2015) is an unrealistic timeframe. Following the policy statement, this will leave firms with only a few months to close old phone lines, set up and establish new phone lines, make significant material changes and ensure website information is up to date. Further guidance is also required on what firms are expected to do with the old phone lines and whether these old numbers will be allowed to redirect customers. This is particularly a concern for insurance customers whose cover will have come to an end but who will still be eligible to make a claim. These customers risk having out of date paperwork that will direct them to telephone numbers that may no longer exist. The current proposed time period is vastly underestimated and is likely to require a significant amount of planning and time to ensure it is fully completed as well as communicated, externally to customers and internally to staff. Therefore a more realistic timeframe is needed and further guidance is also required. 9. Do you agree with our proposed amendments to DISP 2.8.1? Page 4
The ABI supports allowing the FOS to investigate a complaint on the condition that both the customer and the firm have consented to this procedure, prior to the FOS commencing its own investigation. While we support the changes to DIS 2.8.1 we are not entirely convinced that the changes, will add much value to consumers. 10. Do you agree with our proposal to retain the existing six month and six and three year time limits for complaints made to the ombudsman service? Yes, we agree. 11. Do you agree that once a firm has consented to the ombudsman service considering a complaint it should not be permitted to withdraw consent? We agree with this procedure of not allowing firms to withdraw their consent after initially authorising it. 12. Do you have any comments on the proposed wording firms will be required to include in final response letters? While we recognises the benefits of minimum standards for ensuring customers are made aware of their FOS referral rights. We do not however believe the imposition of mandatory wording is necessary to achieve this especially as final response letters should be tailored to individual customers and their complaints. In regards to the timelines, we understand that the new FOS wordings need to be implemented by 14 May 2015. This date is not realistic as these are not yet final rules and as there is a requirement to amend letter templates we would require three months from the date of the finalised wordings within the Policy Statement. 13. Do you agree with our proposal to extend the definition of eligible complainant so it is consistent with the ADR Directive? It would be helpful to have an example of what constitutes eligible counterparties. At the moment this is unclear. 14. Do you have any comments on the new rules in DISP 5 that apply to the ombudsman service s annual reports? No comment. 15. Do you agree with our proposed revision of the dismissal grounds in order to bring them in line with the Directive? We agree that DISP 3 needs to comply with the Directive but as this is not a regulation, this does not mean that the FCA cannot go further. Currently the FOS is not empowered to consider commercial disputes and it would be inappropriate for the FOS to start dealing with commercial issues. This is a significant material difference to what currently exists. Therefore we recommend that the FCA extends its seven grounds on which it may dismiss a complaint, to include commercial disputes. 16. Do you agree with the proposal to amend the test case rules in this way? We agree with the proposal to amend the test case rules, on the basis of obtaining the consumer s consent. Page 5
17. Do you have comments on the proposed wording for this rule? No comment 18. Do you have any comments on the proposed amendment to DISP on the timing of complaints procedure disclosure for intermediaries within the scope of the MCD? Not applicable 19. Do you have any comments on the possible impact of this proposal on vulnerable consumers? The aim of these proposals is to deliver a straightforward, transparent and fair complaints procedure for consumers and this especially applies to vulnerable consumers. Therefore to keep the procedure straightforward, it is important to have a relatively simple procedure that does not seek to overcomplicate which will only lead to confusion for the customer. Otherwise, in order to address the needs of vulnerable consumers correctly it is important to be able to identify them. Risk factors can include bereavement, illiteracy, illness, disability or other impairment. In many cases more than one risk factor is present which increases the consumer s vulnerability. Frontline staff need to be alert to the signs that the person they are talking to may not have the capacity, at that moment in time, to make an informed decision about the implications of the agreements that they are being asked to make. This is an extension of staff s existing skill of listening, identifying needs, and adjusting their approach accordingly. Firms will have customer service guides and training in place to ensure that their staff are identifying these needs. 20. Do you have any comments on our cost benefit analysis? The ABI is fully supportive of the FCA s objective to improve the complaints procedure for consumers. This is beneficial both for the consumer and for the firms that they are dealing with. We are however concerned that these proposed changes do not represent the most efficient way to achieve this objective and risks increasing formality and bureaucracy for consumers. We do not feel that the FCA has sufficiently taken into consideration the potential costs involved. Instead we feel that the operational costs and the impact of these changes have been vastly underestimated. In particular for the summary resolution communication, this will involve a significant cost for industry without any clear benefits. While this will raise the profile of the FOS, we are not convinced it will necessarily improve the complaints procedure. It is vital that we avoid implementing changes that will not benefit the consumer Furthermore there is the potential for there to be unintended consequences and costs with more complaints being handled formally. Page 6
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