View more on these topics

Cicutti: FSA must get tougher on complaints handling

Early one Sunday morning a few months ago, a good friend of mine and his partner were raided by police and social security officials.

Up to 10 coppers wearing padded riot clothing stomped into the house, cuffed him and his girlfriend – who each weigh about six stones fully clothed – and dragged them down the local nick. This was in full public view of all other occupants of the block of flats they live in.

My mate and his partner’s alleged crime was benefit fraud. She has a severe permanent illness and is unable to work. He lives with her in her housing association flat.

Although he does not claim any benefits himself, the allegation was that she had been claiming rent on the property, to which she is not entitled.

After almost three months of investigation and endless interviews, the case was dropped. Although the woman may have unwittingly committed an offence when her boyfriend moved in with her two years ago, she was, in fact, not claiming for a vast range of other benefits for which she was eligible. Ironically, she is now financially better off as a result of the raid.

I thought of my mate and his missus the other day as I was driving to work and heard on the radio that the FSA has fined Bank of Scotland £3.5m for rejecting almost half of the complaints it received in relation to the misselling of financial products.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, was quoted as saying: “The firm’s failure to ensure it had a robust complaint-handling process in place led to a significant number of complaints being rejected when they should have been upheld.”

My argument is that a fine – even one of £3.5m – is simply an occupational hazard, not a serious deterrent. There is no longer a reputational risk involved in being spanked by the regulator.

According to Peter Vicary-Smith, chief executive of Which?, there is a need for a fundamental overhaul of the way the banking industry deals with complaints.

Which? wants all firms receiving more than 100 complaints every six months to be made to publish their complaints prominently on their customer website.

Similarly, the FSA would make all complaint statistics available on its own website in a searchable database.

Firms receiving more than 100 complaints every six months should be required to publish a written digest which would identify the main types of complaints received, how they had been dealt with by the firm and what action the firm had taken to address the root causes of the main type of complaints received.

Which? is calling for “significant” fines on anyone breaching rules failing to treat complainants fairly. They should “relate to the significant financial benefit which firms had gained from failing to deal properly with complaints.”

That’s spot on. If instead of £3.5m, BoS had been fined £70m as a deterrent – and every other institution were to be hit likewise, we would soon see whether they still have a taste for rejecting complaints unnecessarily.

Vicary-Smith is also calling for enforcement action, including fines and bans on working in the industry, against individuals heading the complaint department and board members too.

Perhaps anyone accused of such activities should face a team of rozzers smashing their way into their houses and making them do a UK version of the “perp walk”. If it’s good enough for my mate and his missus, it’s good enough for the banking industry’s finest.

Nic Cicutti can be contacted at


News and expert analysis straight to your inbox

Sign up


There are 22 comments at the moment, we would love to hear your opinion too.

  1. Nic – your article goes straight to the heart of what is wrong with how banks treat complaints – the penalties for misselling, mishandling complaints and generally waving two fingers in the direction of TCF principles are simply treated by the banks as a cost of doing business. If the penalties were to be made proportionate to the profits they had made out of their misdeeds then you would see a radical change to their attitudes.

  2. Seems totally illogical!

    Clearly, HSBC or Barclays is going to receive far more complaints than say 1 man IFA firm – so why ‘penalise’ a firm for being larger?

    If it said ‘receive complaints from more than 0.1% of it’s client’/customer base’ that may well have meirt and is fairer.

    What I think would help the industry though, would be that strong action taken agaiinst those that don’t investigate complaints fairly – but equally Fraud cases should be commenced againist individuals who commit (attempted) fraud with their complaint.

    Alas, there is zero risk to complainants ‘lying through their teeth’ – which makes it harder for those individuals who do have a grounds to complain, to make their voice heard.

  3. These huge fines the FSA impose, who benefits from them? Do they go back as compensation to claimants or do the FSA use them for other purposes.

  4. Reputational risks don’t pay for the FSA Christmas party though!

    Anyway, you think the way the state may have reacted to your friend was draconian, you obviously haven’t met my compliance department!

  5. Just so we are clear on this, Is Nic Cicutti suggesting that each individual IFA who is slightly slow in investigating the umpteenth fraudulent complaint (i.e. fraudulent by the complainer, not the IFA) be subject to this level of intimidation by the authorities?
    Since it appears to be the case, does he still fail to see the link why the number of firms promoting responsible savings has fallen and won’t recover?
    Tell us Nic, did you actually write the handbook on irresponsible journalism?

  6. Voice of reaason 2nd June 2011 at 11:52 am

    Johm L and anonymous miss the point completely and have used this space for yet more pointless and boring regulator bashing.

    I agree with Nic’s sentiments and Paul H makes a good point about a proportion of client base rather than a fixed number of complaints. There is also an arguement that the larger the fine the greater the reputational damage although we as customers ultimately pay.

    I have seen a complaint to the same institution upheld for one client and an identical complaint rejected for the spouse which is now with FOS.

    If a client ‘lies through their teeth’ documentary evidence should if complete and accurate defend the complaint and prove that the client has (let’s say politely) selective memory.

  7. Steven Farrall (Adviser Alliance) 2nd June 2011 at 12:24 pm

    Notice the common factop in the police actions against Nic’s mates and the FSA and the Bank?

    Yep, all nationalised organs of the state.

    It’s not better ‘complaints’ handling that is needed. It si the rolling back of the State. Denationalise the banks and scrap regulation that increases barriers to entry and reform the banking charter as recomened by Douglas Carswell will sort the banks. Scrap the FSA/FOS/FSCS structure which has zero external accountability. In re the police and the benefit system. The police bring in locxally elected police commissioners which will make the police accounatble to the people they serve. Scrap the benefots system as currently constituted and replace with a universal citzens pension based on land value tax.

    Do all that and all the ludicrous bureaucracy can be shut own.

    As usual NC nails the sympton and compleetly ignores the disease.

  8. On the fraudulent claims issue. Fraud is basically “misrepresentation”. It feels as if there are individuals, ifas,providers and regulators all involved in misrepresentation !

  9. Thanks Voice of Reason.

    Much better wording ‘”Selective memory” – but what happens (as I have seen) FOS accepts “Selective Memory” as being the truth over documented evidence?

  10. Thanks for your input VOR. I was only asking a question and not regulator bashing as you claim . I suggest that you could invest in a dictionary. It might help your spelling!

  11. So your mate’s girlfriend was living in a flat where the rent is paid for by the taxpayer, and he then moved in with her and she continued to claim for the flat even though maybe your mate was working since “he claims no benefits himself”… I wonder how they got off? Please let me know so I can get my unemployed girlfriend to do something similar.

  12. Exasperated me 2nd June 2011 at 5:35 pm

    Should the fundamental question be why are the so many complaints?

    Come on FSA, why do you allow the banks to get away with this?

    Pardon? You might be in line for a big fat salary at one of the banks when your regulatory tour of duty is over?

    I see…

  13. Julian Stevens 3rd June 2011 at 10:21 am

    Again, the banks, the banks. “The Regulators’ Compliance Code is a central part of the Government’s better regulation agenda. Its aim is to embed a risk-based, proportionate and targeted approach to regulatory inspection and enforcement among the regulators it applies to.” Note the words risk-based, proportionate and targeted.

    The problems we are seeing now, namely the large scale mis-handling of complaints, is surely an accumulated legacy as a result of decades of successive regulators failing to enforce standards of good practice in a manner approaching risk-based, proportionate and targeted.

    But hey, ho, the FSA’s solution remains the same as ever ~ more levies, more fines, more staff, more resources and more power. Same old same old. Despite the FSA’s unquenchable thirst for change, change, change, the fundamentals remain the same. Wouldn’t it be nice if, just for a change, the FSA made a serious attempt to do better with what it already has? Precious little chance of that, though. Never mind, it’s all other peoples’ money, so what the hell?

  14. Simon Mansell 3rd June 2011 at 9:11 pm

    Nic as is often the case your argument is an over simplification. Making all complaint statistics available sounds like a good idea as long as one can be sure that the complaint itself is fair and reasonable and not some retrospective redefinition of regulatory requirements. So often we have regulation via the rear view mirror where a complaint is not based on the rules and standards in place at the time of the sale but rather some retrospective reconstruction. I’m afraid the FSA are not prescriptive and seldom tell us what we should or should not be doing. Instead they prefer to act with hindsight or invert the burden of proof, which would otherwise apply. In such cases the complaint is merely a reflection of poor regulation and in such cases publication would not benefit the consumer because we are finacial advisers and not regulatory mind readers.

  15. @John L. To answer your question. FSA fines are used to reduce the levy for the following year for the same levy group. e.g. if Bank A gets a fine of £X million then the FSA fee levy for all the banks is reduced by £X million the following year.

    IMHO any fine should reduce the TOTAL levy, not just the levy for that particular group.

    I had cause to make a bank complaint in March last year (the bank misinterpreted a request to close my credit card account and closed my current account instead). During one of my many conversations with them I stated “for the record, this is an official complaint”. It was never acknowledged which makes me wonder if the banks aim to improve their complaint statistics by simply ignoring them!

  16. Well said Nic; I don’t often agree completely with what you write.

    Isn’t it also time that the banks had withdreawal of permissions as a very real threat?

    I can see the problem though: for example, if Lloyds lost its permissions to arrange home insurance, the market would find difficulty coping with the sudden influx of business. That could be solved by making them run off the business in an orderly fashion and their permissions going after 12 months.

    Maybe the banks then wouldn’t take the commercial view of fines – an expense of doing loads of business.

  17. I had a similar experience to Steve Laird. My bank (NatWest) has, shall we say, a rather unhelpful way of resetting internet passwords in so far as it takes about three weeks. When I complained they said “we treat everyone the same” which I countered by saying that just because you mess everyone’s finances up the same way for three weeks doesn’t make it fair or right.
    I had to point out to them that whether they agree it is a well founded “complaint” or not, it is not their decision whether to even log it as a complaint.
    Clearly they are gaming the system and Sants and his cronies smile and let it go.

  18. I think it is already a regulatory requirement for firms to publish the number of complaints on their websites. Certainly is for larger institutions – published every 6 months.

  19. The mistake your friend’s girlfriend made, Nic, was to fraudulently claim she was entitled to benefits from the State rather than redress from an IFA.

    If she had downloaded a letter from the internet and submitted a complaint packed full of lies to an IFA, FOS would have ignored the fact that doing so is a crime under the Fraud Act and the worst that would have happened is she’d have got nothing.

  20. Perhaps if 10 coppers in padded kit stomped into one of the MD’s of the big banks houses, kicked in their doors and made lots of noise in front of their neighbours then perhaps they would think a little harder before committing some of the acts which cause these issues and subsequent fines.

    The most telling sentence in your article Nic was:

    “There is no longer a reputational risk involved in being spanked by the regulator.”

  21. @ Martin Smith: The woman concerned suffers from a severe long-term illness that means he is unable to work. He has lived there for the past two years. I never said whether he works or not, only that he doesn’t claim any benefits off the state. Since she wasn’t charged they has been able to claim a range of state benefits to which they were both unaware that she/they were entitled to, backdated by six months.

  22. The important word is “Proportionate”, so for once I agre with Nic C. This was NOt proportionate and a system which reacts disproporionately will have similar reactions from its citizens.
    You can imply the same with the F-pack system. Big boots and no rights will result in reactions from advisers which are disproportionate.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm