Last week I summarised the FSA's plans for funding the Financial Ombudsman Service and Financial Services Compensation Scheme. Having looked at the funding of these schemes (outlined in CP04/04) let's now take a look at how to handle complaints.
The rule of thumb here, of course, is that prevention is preferable to cure. The mortgage industry generates relatively few complaints as a sector and FOS has gone on the record as saying it does not expect a swathe of mortgage complaints when it takes over from MCAS on October 31. This is good news but firms will greatly increase their risk of receiving complaints if they fail to build wellorganised internal procedures in time for FSA regulation.
Handled well, complaints need not require FOS intervention – only unresolved cases are taken up by the organisation. This may incite groans of protest from IFA firms reeling from endowment, split caps or pensions complaints but even there, the FOS' track record is reassuring to some degree. On mortgage endowment complaints, fewer than one in 10 are against IFA firms. Of those that go into adjudication, four out of five are not upheld.
The IFA experience certainly suggests firms can increase their chances of success during FOS complaints by improving the presentation of their case. Those who do not – or those who pay only lip service – invariably find the process lengthens and, after all, it is in firms' interests to spend as little time as possible dealing with complaints when they arise.
Consequently, treating complaints in a professional and courteous manner is of great importance. Firms should respond in a clear, concise way and address the details of the complaint. Complainants are not always clear about the alleged grievance so defining this will help. Also, however irksome or without foundation a firm may consider complaints to be, all must be taken seriously and dealt with dispassionately. Should the case end up at the FOS it is likely that the final response letter will be the starting point for the FOS' investigation, so firms should consider their communications with the complainant accordingly.
Firms should also check whether their PI insurer insists on notification upon receipt of a complaint – which leads us to the issue of record-keeping. Mortgage Day brings with it higher standards and not all firms will have the historical documents and records required to review a complaint. Where possible, firms should ask the client for any papers presented at the time of the advice but this is an undesirable situation which only underlines the importance of good record-keeping.
Though some complainants go straight to the FOS, the Ombudsman can not look at a complaint until the firm involved has had an opportunity to review it. Where possible the FOS attempts to mediate between the parties and around four in 10 IFA complaints are settled this way. Sometimes the FOS will suggest that a case is not worth pursuing, while other cases can be resolved by agreeing a limited amount of compensation. Only when mediation fails will an FOS adjudicator step in as arbitrator.
For further information visit the FOS website www.financial-ombudsman.org.uk