The regulator says five banks are undertaking major changes to the way they deal with complaints and two of the five banks have been referred to its enforcement division for further investigation.
The FSA says its review looked at several banking groups responsible for over 70 per cent of the complaints firms receive and report to the regulator and over 60 per cent of those resolved by the Financial Ombudsman Service.
The FSA says it found poor standards of complaint handling within most of the banks assessed including a lack of senior management engagement and accountability for complaint handling, poorly designed staff incentive schemes that made branch staff reluctant to pay redress to customers and poor quality complaint handling by staff.
The regulator found “complaint handling procedures that led to staff issuing multiple, repetitive responses to customers, forcing them to restate their complaint a number of times in the face of ongoing negative responses from the bank”.
The FSA says the banks failed to learn from previous complaints and to make changes to prevent similar complaints arising in the future.
The regulator says it did find examples of good and compliant practices in parts of some of the groups assessed.
The latest FOS complaints figures, published in February, showed a big increase in the number of new complaints received against the large banking groups. Lloyds received 20,190 complaints across all its brands while Barclays received 10,892 and RBS received 7098 complaints. Seven hundred new Barclays Bank complaints related to investments, the highest number of investment complaints received by any institution.
As a result of the FSA review, five banks have either put in place or extended the scope of major changes to their complaint handling processes.The regulator will be doing follow up work later this year to see if standards have improved and may change elements of its DISP sourcebook, which will be consulted on later this year.
FSA director of conduct risk Dan Waters (pictured) says: “A culture of fair complaint handling is an important indicator of whether a firm is committed to treating its customers fairly. It is vital that customers know that if something goes wrong, their complaint will be deal with in a reasonable way and that they will get a fair outcome.
“While we found some good practice, there is clearly evidence of unacceptable standards of complaints handling in banks. Delivering change in this area is a major priority and we are determined to use all the tools available to us to ensure that banks comply with our rules.”
Which? chief executive Peter Vicary-Smith says: “This is another damning indictment of the banking industry, many of whose members consistently put sales before customer service and reflects the evidence consumers presented to the Future of Banking Commission.
“Bonuses should be linked to treating customers fairly and the resolution of complaints, not to sales. What’s more, consumers have the right to know which banks the FSA is referring to its enforcement division. If the UK’s banks want to win back the public’s trust, then they must fundamentally change they way they treat their customers.”