Fairness to clients must be central to company culture

21 June 2010

In the current climate Treating Customers Fairly is central to the Financial Service Authority’s regulatory agenda.

TCF aims to ensure an efficient and effective marketplace, and fairer deals for customers.

All firms operating in the financial services sector must be able to show they are consistently delivering fair outcomes for consumers, and that senior managers are taking responsibility for ensuring the firm and staff deliver these outcomes by establishing an appropriate culture.

TCF performance must be measured against customer fairness issues that are relevant to the business and the results acted upon. And woe betide those who fail to comply.

The FSA’s largest ever fine of £33m, recently imposed on JP Morgan for compliance failures, together with the regulator’s ’be very afraid’ threat of draconian consequences over lender compliance misdeeds, has sent shockwaves through the industry.

But what does the TCF initiative mean and how far is too far when striving to treat every customer fairly?

TCF doesn’t mean just being nice to customers. It’s also about behaving responsibly. In other words, clients need to feel confident they are dealing with firms where fair treatment is central to the corporate culture.

But this doesn’t mean that regulators expect all customers to be satisfied all the time.

Whether a customer is satisfied isn’t necessarily a reflection of whether they have been treated fairly. It is the joint responsibility of the lender and the loan servicer to communicate clearly with clients so they have realistic expectations before, during and after the sale.

Consumers must be provided with products that perform as they have been led to believe by a lender, and the associated service must also meet the expected standard.

In simple terms, this involves lenders and servicers placing customers’ interests at the centre of everything they do.

While the needs of customers are king and products and services should be targeted accordingly TCF is not carte blanche for consumers to get everything they demand in a dispute.

In this scenario, lenders need to have robust procedures to ensure fair play and consistency. Above all, lenders and servicers must be able to justify their actions. If such a justification exists and can be clearly demonstrated there’s nothing to worry about.

The trick is to be able to show this to the powers to be, and this is where consistency of process, strong controls and a comprehensive audit capability pay dividends.

In an ideal world systems allow staff to undertake the correct action at the appropriate time in an objective and consistent manner.

Implementing such capabilities not only helps organisations meet the demands of TCF but also provides opportunities to treat customers as individuals.

In adopting a tailored and intuitive approach to customer service lenders must also revisit their relationship with their loan servicers.

Servicers can’t hide behind lenders when it comes to TCF. There must be a collaboration between the two and this relationship will be explored in my next column.

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