The Financial Conduct Authority (FCA) has warned firms not to engage in so called “sludge” practices such as discouraging customers from taking actions such as switching provider or in designing overly long-winded complaints processes.
The regulator also expects average waiting times for customers contacting firms to come down and for these times to not be disproportionately longer when calling to switch or complain compared to buying a product.
It pointed out there are obligations on firms under its incoming Consumer Duty to include appropriate friction in customer journeys and also ensure customers do not face unreasonable barriers or “sludge” when they want to act in their interests.
This can include for example, making a claim, complaint or switching to a better product or a different provider.
Speaking on the FCA’s latest podcast, Sean Cafferky from the regulator’s policy team highlighted that when used in the right instances, friction can act as a “valuable” safeguard against harm.
He added appropriate or positive friction might include things like risk callings or additional steps designed to prevent fraud or ensuring customers are aware of the consequences of cancelling a contract.
But Cafferky also touched on the other side of the coin – “sludge” – where firms include friction in their customer journeys to discourage customers from doing things they might prefer they did not, like switching provider.
He also cited the example of designing a long-winded complaints process with lots of extra steps to put customers off.
‘Just making customers’ live more difficult’
“Obviously, we don’t want to see these types of sludge practices,” Cafferky continued.
“So, firms may be asking themselves well, where’s the line? When does positive friction become sludge?
“What we expect is firms to review their customer journeys and look out for frictions along the way, considering the impact on customers. So, asking what is this friction point doing?
“Is it there to protect customers from harm and nudge them to make the right decisions or is it just making customers’ lives more difficult by getting them to jump through hoops to do something that’s likely to benefit them.
“It’s the outcome here that really matters, so again firms’ monitoring will be important in helping them understand how customers behave and respond to different journeys and whether they’re driving the right outcomes.”
On what counts as reasonable in terms of delays to customers getting support, Cafferky said the FCA had not set rigid standards for how long a customer should wait to talk to an agent, how long a call should last or how long an issue should take to be resolved.
“What’s reasonable will depend on the circumstances,” he continued.
“For example, there are times where a firm’s call centre may experience unforeseeable demand such as at the start of the Covid pandemic. And there’s other variables as well, including the complexity of the issue in question.
“That means that some delay or inconvenience might not be unreasonable.”
But he was clear that the rules require firms to deliver adequate support that meets the needs of customers.
“Clearly, if customers just can’t get through to their provider, this won’t meet the standard,” Cafferky said.
“The rules and guidance are also clear that a consumer should not face unreasonable delays, whether that’s to switch, complain or get help, whatever the channel.
“So, this all means that we do expect to see average waiting times to come down. And we also expect firms to be able to demonstrate with data they’re providing appropriate support, whether that’s complaints, average waiting times, customer satisfaction and so on.
“Another key test we’ll be looking at, which any firm can easily apply, is on the relative standard. So, making sure people are not waiting disproportionately longer when they call to switch or complain, for example, than when they call to buy the product.”