Five lenders are failing to handle complaints well

The Financial Services Authority has found weaknesses in five banks’ handling of customer complaints and referred two of them for further investigation.

The regulator’s review looked at banking groups responsible for over 70% of the complaints firms receive and report to the FSA, and more than 60% of those resolved by the Financial Ombudsman Service.

It found poor standards of complaint handling at most of the banks assessed, including a lack of senior management engagement and accountability for the delivery of fair complaint handling.

It also uncovered poorly designed staff incentive schemes that made branch employees reluctant to pay redress to customers, even in situations where the bank was at fault.

Furthermore, banks failed to learn from previous complaints and to make changes to prevent similar complaints arising in the future.

Importantly, the FSA found examples of good and compliant practice in parts of some of the groups assessed, showing that it is possible for lenders to handle high volumes of complaints and still deliver fair outcomes.

Eric Leenders, executive director of retail banking at the British Bankers’ Association, says: “Most customers carry out their everyday banking activities without any problems.

“But the industry was concerned that on the rare occasions when things go wrong, complaints were being handled inconsistently.”

He adds: “We accept that every complaint represents a breakdown in communication and clearly more needs to be done. That is why we are working with the industry to bring all banks up to the standards of the best.”

To help companies meet its requirements the FSA has published a complaint handling file review template to help firms assess if their process is achieving fair outcomes for customers.

The regulator is also reviewing whether it needs to make changes to its rules on complaint handling and will be publishing its proposals in Q3.