Consumer Complaints Rules Revised After Bank of Scotland Violations

Jack Humphrey, Regulatory journalist
May 27, 2011 /

After penalizing Bank of Scotland earlier this week for lax consumer complaints handling, the Financial Services Authority has today issued a new ruling “as part of a package of measures to drive up standards within the industry.”

Bank of Scotland was fined £3.5 million on May 25 in addition to the £17 million customer compensation secured by the FSA after the company rejected a vast portion of complaints it received between July 2007 and October 2009, which should have been upheld.

The new consumer complaints ruling comes hand in hand with the FSA’s extension of the scope of its conduct of business (COB) rules to cover all workplace pension schemes, including group personal pensions (GPPs) before the auto-enrollment starts.

Additionally, the FSA clarified that auto-enrollment into a GPP will not be classed as inertia selling under distance marketing directive inertia rules and that there will be one set of rules and one system for cancelling and opting-out between the FSA and Department for Work and Pensions.

The new consumer complaints rules, on the other hand, would abolish the ‘two-stage’ complaints handling rule to make sure firms resolve complaints fairly and do not dismiss them the first time, requiring persistence from the customer to pursue the complaint.

”We would rather customers were not put in a position where they had to complain, but when they do we want them to be treated fairly by their firm, with their complaint resolved promptly and being provided with redress when needed,” said Sheila Nicoll, the FSA’s director of conduct policy.

The rules would also require firms to identify a senior individual responsible for complaints handling.

The new rules include additional guidance to help firms understand the processes they might need in place to meet FSA requirements on root cause analysis, and further guidance that requires firms to take account of ombudsman decisions and previous customer complaints.

The FSA has also increased the limit on awards made by the Financial Ombudsman Service from £100,000 to £150,000.

“We have found major failures with the way firms handle customer complaints and have since taken enforcement action against two firms as a result of poor complaints practices,” Nicoll said.

The FSA has published aggregate complaints statistics since 2009 to allow customers to see the volume of complaints being received by firms.

In September 2010 the FSA also started to publish firm-specific complaints data, enabling customers to compare and contrast the way different firms deal with their complaints.


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