Financial services firms given August deadline for publishing complaints data

The move follows the introduction of a new complaints reporting regime last year and the publication of the first set of firm-specific complaints data by the Financial Ombudsman Service (FOS) in September.

Since August 2009, all firms have been required to file a complaints return with the FSA every six months. Based on these reports, the regulator published its first aggregated summary of complaints data covering the period 2006 to 2008 in early September, followed in October by figures for the first half of 2009.

By 31st August 2010, however, firms that report 500 or more complaints over a six-month period must also publish a summary of their own figures, showing how many complaints were received and how many were closed, the percentage that were upheld and the percentage that were closed within 8 weeks.

The FSA will publish a consolidated report of this information by the end of September 2010. The arrangement will then continue to operate every six months.

Announcing the FSA’s policy statement on 29th January, Sheila Nicoll, director of conduct policy, said the FSA was committed to greater transparency where this would help consumers.

“For the first time, people will be able to see how many complaints particular firms receive and how they handle them,” she said. “We believe that this will help improve how firms treat their customers and provide incentives for firms to deal more effectively with complaints when they are received”.

But the FSA has decided to allow firms more flexibility in the way they choose to put their figures into context in order to reduce the risk of consumers assuming that larger firms treat their customers less well than smaller firms simply because they receive a higher number of complaints.

The original proposal was for a set of mandatory “contextualisation metrics” for each product or service category, such as the number of complaints per 1,000 bank accounts, or, for general insurance, per £1 million of annual premium growth income.

Under the finalised rules, these will only be advisory. Firms will be able to use alternative metrics if they think the recommended ones do not accurately reflect the scale of their business.

This may make information from different firms less directly comparable, but the FSA has concluded it would not be helpful to require firms to publish information that did not accurately reflect their own circumstances:

"In reaching our final proposals we have thought to balance what we believe is a real need to focus the firm's attention on complaints handling generally and the benefits this will have for consumers as a result, with the desire by firms that such published data be presented in a way which is meaningful and relevant to a particular firm so as not to inadvertently mislead."

Complaints must be included in a firm’s return if they are not resolved to the customer’s satisfaction by the close of the next business day. The FSA, however, is aware that firms may be tempted to minimise their reportable complaints by changing the way they handle or categorise complaints. It is currently reviewing the quality of complaints handling at major banks and will be keeping a close eye on any evidence of changing practice.

“We have identified firms' complaints handling as a priority conduct risk,” the FSA says in its policy statement. “We will continue to use our supervisory powers to ensure that the standards of complaints handling are improved. As part of this, we will be analysing the trends in complaints data published by firms”.

One development the regulator is already anticipating is a large increase in the number of reported complaints to banks after the recent Supreme Court ruling effectively ended the test case challenging bank charges for unauthorised overdrafts. 

An FSA waiver meant that firms have not had to include such complaints in their returns since July 2007, pending the outcome of the test case. Now, however, that waiver has lapsed and firms have resumed handling bank charges complaints in the normal way. The regulator suggests banks may wish to explain some of this background when they publish their own data.

The new rules, which come into force on 6th April, will not apply to branches of EEA firms operating in the UK, although they may choose to participate if they wish.

The FSA is also undertaking a review of its current regulations on redress and will be publishing a discussion paper in the first quarter of this year. In the meantime, it says it will continue to work closely with the FOS to ensure the information published by both organisations is as comparable and useful as possible.