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Back to the drawing board on TCF


There has been so much written on treating customers fairly, in particular the voluminous documentation produced by the FSA over the years, that one can

be forgiven for despairing whenever TCF is mentioned or wondering whether it is still topical at all.

However, with the FSA’s Arrow inspection season looming in September, and with recent fines from the regulator, it is worth revisiting what TCF means as it remains a key supervisory focus for the FSA and for its successor, the Financial Conduct Authority.

When the FSA first introduced TCF, it was criticised as a nebulous concept that was not grounded in what firms have to do, the assertion being that we all treat customers fairly. In response, the FSA published the TCF outcomes.

However, along with its principle-based approach, the FSA would not map out how it expected firms to arrive at the outcomes and so the supervisory focus has been on firms using appropriate TCF management information to be able to demonstrate they are TCF-compliant.

Whenever the FSA is considering TCF, it first looks at the level of customer detriment because this ties into one of the principles of good regulation, namely that a regulator’s focus must be proportionate.

The increased focus on consumer detriment is reflected in the FSA enforcement and financial crime division’s new habit of requiring consumer redress in many of the cases it now deals with, together with the first use of consumer redress powers under section 404 of the Financial Services and Markets Act.

One of the key areas in which firms can demonstrate their commitment to TCF is the way they handle complaints.


Complaint-handling has been of key importance for the FSA over the last two years, highlighted by its thematic work with banking groups in 2009 and 2010, its recent battle with the British Bankers’ Association over the handling of PPI complaints and recent final notices.

Complaint data can be useful but only where complaints are adequately reported and the data is assembled in a meaningful format so it is valuable to those reviewing it.

Examining complaints upheld by the Financial Ombudsman Service, who and where complaints are coming from, about what or about who,
is all useful management information and should help senior management spot trends and identify root causes that can then be fed back into product or service development and sales processes.

As an all-encompassing principle, TCF is undoubtedly something most firms try, and always have tried, to achieve as a matter of good business sense. However, with the FSA’s more interventionist stance and its anticipated micro-management or quasi-approval of retail
products through its product intervention proposals, is the principlebased approach still the cornerstone of FSA policy?

Indeed, one wonders if the FSA’s product intervention proposals could themselves undermine one of the objectives the FSA is required to achieve, namely, confidence in the financial system.

Confidence in the financial system has to start with confidence in the regulator, so what would happen if a mainstream financial product passed the ’FSA test’ but went on to cause unexpected consumer detriment?

Confidence in the regulator would be irreparably damaged and, with it, confidence in the financial system.

Nevertheless, firms are well advised to reconsider their TCF procedures and processes objectively and ask themselves if they are able to extract findings from our processes to ensure there is a perpetual model of development against customer detriment – something the FSA should also be considering for itself.

Suzanne MacDonald is partner and head of financial services regulation and Mark Pritchard is a solicitor specialising in finance services
regulation at TLT


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Pissed Off IFA 15th June 2011 at 4:30 pm

    TCF was never about Treating Customers Fairly- it is about covering your backs with the clients’ real interests being of secondary importance.

  2. A senior regulator asked how you can have principles based regulation when many of the regulated have no principles, who was it?

  3. Another Pissed Off IFA 15th June 2011 at 4:45 pm

    When the FSA starts treating people fairly we will know that TCF means something. But until then….

  4. Re Hector Pants @ 4.43
    He was the one who accepted a salary of £500000 plus a bonus of £150000 plus £ 131000 car expenses plus £60000 towards his pension.All for failing to regulate the out of control banks.
    No wonder he also told us we should “be afraid, be very afraid.”

  5. TCF came in to undermine the industry Raising Standards initiative which was in my opinion far better though at the time not every provider had signed up.

    The FSA then rolled their version out to all including advisers but it had not been thought through and was a muddle of prescriptive and principles based rules.

    TCF is important and I think the vast majority of us in this industry do try to behave in reasonable and fair manner. Should be a given really.

  6. The Principle that is TCF formed part of the actions by the FSA in the cases of GMAC, Kensington, Redstone, Joseph Cummings and DB Mortgages.

    Whilst each featured fines imposed on those found in breach of TCF – perhaps more importantly they also featured consumer redress based on TCF.

    I don’t think it takes any great leap of the imagination to suspect that the FCA, (originally billed as a consumer champion) will ignore the lessons from cases such as those, and others, and seek to more firmly embed TCF as a set of Rules, rather than leave it as a Principle.

    I would suspect right now that the FSA are simply laying down the blueprints for such rules that the FCA can adopt and follow in due course

    We shall see.

  7. TCF is a misnomer. Good corporate governance would be a more accurate description of what it seeks to achieve.

    Unfortunately they have gone too far with the principle, expecting too much to be recorded.

    They fail to trust, even when all else is obviously ok, yet trust implicitly in cases where experience says they should not: e.g. banking.

    No change there then.

  8. Julian Stevens 16th June 2011 at 9:19 am

    Who knows what the FSA will come up with next? They just seem to make it up as they go along. The rest of us just have to muddle through as best we can.

  9. Re Hector Pants….£131000 CAR expenses, what the *** sort of car is that!
    Very TCF paid by customer Commissions & fees. very worthy of a public servant…….not

  10. His garage must charge fees Andy

  11. In a profile from the Guardian newspaper a couple of years ago Sants lists his hobby as classic cars, so we are not only paying his salary we are paying for his hobbies.
    He also lists obtaining a knighthood as one of his ambitions. No doubt we will pay for the knees up when that happens.

  12. Ms MacDonald, you write “Confidence in the regulator would be irreparably damaged and, with it, confidence in the financial system.”

    Unfortunately those are among two of the FSA’s greatest failings.
    1. The FSA has catastrophically undermined consumer condfidence in financial services (just read the public’s views on pensions in any newspaper)..
    2. The number of professionals who have confidence in the regulator is not obviously in the majority, at least not if the comments made in the trade press are any guide.

    I suspect I am not alone in wishing the situation were otherwise.

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