Capturing more granular data from more sources including social media and reviewing unsuccessful cases submitted to the Financial Ombudsman Service (FOS) are among a series of improvements financial services firms can make to their complaints handling.
The Financial Conduct Authority (FCA) also urged firms to assess the impact of changes they have made and highlighted examples of good practice, such as asking the five whys.
The recommendations were part of the FCA’s review of complaints handling and root cause analysis practices since the Consumer Duty was implemented 18 months ago.
Overall, there remained much for firms to work on with three key areas identified for improvement:
- analysing data for different customer types
- taking action based on these insights;
- assessing and measuring the impact of these actions.
These largely focused on obtaining more granular data to understand outcomes and then being able to interpret and utilise that data.
However the regulator said the 40 firms it sampled of various sizes across the market had introduced good management information and clear governance structures, noting firms were able to identify the trends and themes of complaints.
It also noted that most firms could evidence clear escalation routes and accountability, meaning everyone across the business knew where to send management information.
Complaints data – social media and FOS cases
The FCA found that although complaints information was captured, this was not always granular enough to tell the firm about the outcomes for different groups of customers, including those with characteristics of vulnerability.
This meant some issues were not being properly identified, especially where firms had diverse target markets for their products.
Highlighting good practices in the market, it revealed some firms had developed dashboards setting out their management information and helping them track changes.
For example, data included complaints volumes and outcomes, complaints from vulnerable customers and linked these back to Consumer Duty outcomes.
One firm said it looked at FOS complaints that were not upheld so it could understand what drove complaints even when the outcome to the complaint was judged to be fair.
Another firm used social media feedback alongside its own data to see if there were common themes.
Acknowledging that smaller firms would have less complaints data to work with, the FCA highlighted one organisation which was using regulatory letters and decision and industry news to identify potential issues.
Root cause analysis – The Five Whys
The FCA found most firms it sampled had a framework for carrying out root cause analysis and this was set out clearly.
However, it was not always evident that firms were taking action after identifying harm and where firms did make changes, many did not say what the impact of these changes had been, or have monitoring systems in place.
The regulator saw examples of firms whose process was high-level and did not effectively identify trends and systemic issues.
“The lack of this data will clearly limit the ability of executives and boards to review implementation of this aspect of the duty,” the FCA said.
One good example flagged by the regulator was a firm which adopted the Five Whys problem solving technique to encourage deeper thinking and challenge assumptions about the root cause of a problem.
The FCA noted that an example of this in practice related to a consumer being declined a loan might be:
- Why was the loan application declined?
The consumer’s credit score didn’t match the lender’s requirements. - Why did the customer think they were eligible?
The lender’s marketing materials suggested a customer would qualify based on other factors such as income. - Why were marketing materials misleading?
Because they didn’t clearly explain that credit scores were a factor in deciding whether to give a loan. - Why didn’t the marketing materials set out the importance of credit scores?
Because the lender didn’t test the materials with customers to make sure they were clear - Why didn’t the lender test the materials?
Because they didn’t have a formal process in place to test customer-facing communications to ensure they are clear.
Governance – vulnerable customer working groups
Of the firms sampled, the FCA found most had clear organisational structures and clear overall responsibility for complaints.
The FCA saw evidence of clear escalation routes and accountability, meaning everyone across the business knew where to send information, while data dashboards or data packs were often presented at committee and board meetings.
However, it was not always clear from organisational charts who was responsible for complaints and where this person was named, the FCA could not always see from the how substantive issues relating to complaints were fed back to them.
In some cases, firms appeared to be sending data to committees as a tick-box exercise rather than an opportunity to engage and drive change.
In these cases, the FCA saw no evidence of discussion and engagement on the data by decision-makers in the firm.
For this section, one good practice highlighted was that of good policy documents which were interactive, engaging and informative, giving examples of common situations to equip staff to know how to handle a situation or process.
The FCA also added that some firms had working groups to discuss issues faced by customers with characteristics of vulnerability.
One firm in particular held monthly meetings to review existing governance documents and update policies to help address issues raised.
