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Consumer credit firms and complaints handling – are there problems down the line?

The FCA has written to consumer credit firms a Dear CEO letter dated 13 September 2017 about complaints handling. In its letter, it outlines the results of its recent review of how consumer credit firms approach and deal with customer complaints. 

Whilst the review found examples of good practice, it also found "material non-compliance and other concerning practices." Amongst these were:

  • A failure to provide to customers the required information about the Financial Ombudsman Service. For example, almost half of firms' websites reviewed failed to include the required references to the FOS.
  • A failure to provide to the complainant a clear explanation of the outcome of the complaint and why this had been reached.  This included failures as basic as a failure to provide a clear explanation of the assessment of the complaint, the decision itself and the reasons why a complaint was rejected.
  • A lack of management controls in place to analyse and remedy any root causes of complaints or systemic problems.   The letter stated that "a significant proportion" of firms had failed to carry out a root cause analysis on their main cause of complaints. Indeed, where they had, there were few examples of the analysis resulting in other customers who were affected by the same issue, but who had not complained, being identified and provided with redress as appropriate.

As a result, the FCA stated that it required firms to review how they identified, recorded and dealt with complaints and how this was communicated to customers, with particular reference to the FCA's findings.  The FCA warned that it may ask for evidence of firms' reviews of their complaints handling processes following the letter. It warned of the enforcement consequences that could follow where there were serious failings.

The consumer credit industry is still in the relatively early stages of authorisation by the FCA. It is certainly a focus for the FCA. In an environment in which culture and the consumer are very much foregrounded by the FCA, the FCA has for example recently proposed a new rule and guidance on staff incentives, remuneration and performance management in consumer credit firms. There are certainly parts of the consumer credit industry that appear susceptible to FCA enforcement action.  In the current environment, it is possible that complaints handling by consumer credit firms could be an area that gives rise to future enforcement action.