The UK’s Financial Services Authority says that it is contemplating enforcement action against a couple of banks after finding weaknesses in their complaint handling practices.

The FSA published the results of a review of banks’ complaint handling on Wednesday, reporting that five banks are undertaking major changes to the way they deal with complaints as a result of that review. And, it said that two of the five have been referred to enforcement for further investigation.

The review found poor complaint handling standards within most of the banks assessed, including:

• a lack of senior management engagement and accountability for the delivery of fair complaint handling;

• poorly designed staff incentives that made branch staff reluctant to pay redress to customers, even in situations where the bank was at fault;

• poor quality complaint handling by branches and call centres leading to inadequate investigations, poor decision making as to the outcome of the complaint and unsatisfactory correspondence with customers;

• procedures that led to staff issuing multiple, repetitive responses to customers, forcing them to restate their complaint a number of times in the face of ongoing negative responses from the bank; and

• a failure of banks to learn from previous complaints and to make changes to prevent similar complaints arising in the future.

The FSA noted that it did find examples of good and compliant practices in parts of some of the banking groups assessed, demonstrating it is possible for banks to handle high volumes of complaints and deliver fair outcomes for consumers.

“A culture of fair complaint handling is an important indicator of whether a firm is committed to treating its customers fairly. It is vital that customers know that if something goes wrong, their complaint will be deal with in a reasonable way and that they will get a fair outcome,” said Dan Waters, the FSA’s director of conduct risk.

“While we found some good practice, there is clearly evidence of unacceptable standards of complaints handling in banks. Delivering change in this area is a major priority and we are determined to use all the tools available to us to ensure that banks comply with our rules,” he added.

The Financial Services Consumer Panel said that it welcomes the regulator’s action on bank complaints. “It is disgraceful that senior management in many banks are not taking complaint handling seriously and sorting it out. It should be easy for customers to complain. Clearly, this is often not the case,” it said.

“It is no wonder that the banks have objected to recent FSA moves to publish complaints data,” said Adam Phillips, chairman of the panel. “This FSA report shows that the way banks are handling complaints is lamentable, and can cause real suffering to consumers. Banks will only really change their behaviour when there is no escape from public scrutiny — and there is meaningful information available to show how banks are treating their customers. The FSA needs to take swift and effective action, and to continue its work to ensure published complaints data is as clear as possible.”

The FSA said that it is reviewing whether it needs to make changes to its existing rules on complaint handling and will be publishing its proposals in the third quarter of this year.

IE