The FSA's principle-based approach to regulation will lead to fairer handling of complaints, says Martin Shaw
The FSA's move towards principle-based regulation is great news for consumers. While on first inspection the new rulebook covers largely the same ground as the outgoing one, the shift from prescription to principle-based regulation represents a move towards defining fairer and timelier outcomes from complaint handling.
There is an abiding concern within the FSA that some customers find it difficult, or even impossible, to make a complaint. Research among complainants indicates that customers are not impressed with the way complaints are handled, regardless of the outcome.
The new rules are clearly intended to improve some of these areas of dissatisfaction. This includes forcing the industry to measure quality from the customers' perspective and removing barriers to a quick and fair decision.
The new rulebook provides two definitions of a complaint, both based on the British Standards Institution definition that "any oral or written expression of dissatisfaction (whether justified or not) about the provision, or failure to provide a financial service".
However, the requirements for the Markets in Financial Instruments Directive (MiFID) mean that the definition diverges depending on whether the product or service is captured by MiFID or not. For those complaints outside the scope of MiFID the rulebook definition adds the requirement that the person, or eligible complainant "by whom the dissatisfaction is expressed, has suffered (or may suffer) financial loss, material distress or material inconvenience".
In effect, the principles are intended to promote more effective coordination of complaints management in companies. What we are beginning to see is a new landscape for complaints.
The key message to the industry is that complaints should be handled on an individual basis: with timescales for resolution established that are reasonable, given the complexity of the case, and with decisions made that are fair and clearly communicated and used to enhance the future efficiency of the organisation.
Companies keen to develop a cultural rather than compliance approach to complaints should welcome the limited freedom the new rulebook allows. But a shift to principle-based regulation will put more onus on companies to consider how best to handle complaints well. IT
Martin Shaw is an independent consultant on regulatory issues