The number of financial penalties for breaches in treating customers fairly (TCF) jumps under new FSA drive
Treating customers fairly (TCF) breaches now feature in 40% of all fines imposed by the FSA, up from just 11% of fines in the previous year, according to research by City law firm Reynolds Porter Chamberlain (RPC).
Overall the number of financial penalty notices handed out by the FSA has risen by 58% to 30 during the last year (to March 31 2007) from 19 cases in the previous year.
Robbie Constance, solicitor, with RPC said: “The enforcement of the FSA’s TCF initiative is now really beginning to bite."
But he added: "The big difficulty with the TCF principle is that it is too vague. By refusing to define or provide guidelines on how to implement TCF, the FSA is causing a headache for firms.
“This state of regulatory uncertainty makes it very costly for firms to attempt to comply.”
RPC said that to meet TCF firms had to fully explain terms and conditions, make customers aware of any hidden costs, test any promotional material with a non-expert; and customers must be able to switch service providers without facing unreasonable barriers.
“The enforcement of the FSA’s TCF initiative is now really beginning to bite.
Robbie Constance, solicitor, with RPC
However, Constance insisted there were other problems associated with TCF.
“The Financial Ombudsman Service (FOS) will decide whether companies have breached the TCF principle. But the FOS does not work as clearly as a court of law. There is still substantial uncertainty as to how they will deal with TCF,” he added.
Under the FSA’s core principals, which govern the regulation of the sector, financial services companies must “treat customers fairly”. Over the last 18 months the FSA has put TCF at the centre of its disciplinary drive, making it clear that companies that breach this principle will be fined.
Only 41% of small firms were able to meet the FSA’s deadline of March 2007 to implement TCF into a “substantial part of their business”; compared with a compliance rate of 93% for major retails firms.