Complaints data cannot be relied on to compare and contrast firms
The publication of data has successfully raised the profile of complaints handling but disparities in the data means it is misleading to use it as an unofficial league table
Ernst & Young’s survey of nine major retail financial services firms in the UK, Under the microscope, published today shows that the FSA‘s drive to publish complaints data has succeeded in raising the profile of complaints handling and that financial services firms have pushed complaints up the agenda. However, the published data is now being used by the public and the media to compare and contrast firms when it is not consistent enough for this purpose – not all customer complaints are captured, firms’ definition of a reportable complaint differs significantly and some firms include invalid PPI complaints, which distort the data they report. As a result the published data is creating a misleading benchmark of the industry.
FSA and FOS complaints data has served its purpose...
The Financial Services Authority (FSA) has published firm-specific complaints handling data every six months since 2010. This was aimed at increasing transparency on how individual firms handle complaints and to push complaints up the business agenda within firms’ management.
John Liver, EMEIA Global Regulatory Reform leader at Ernst & Young said: “The FSA’s move to bring complaints handling up the agenda appears to have worked. Firms have grasped the importance of this issue at the highest level, and all firms now have Chief Executive or Senior Management engagement with complaints.”
... but the data is being misinterpreted
“The FSA rules and definitions are important for supervisory purposes and for creating grounds for referral to the FOS, but do not create a clear picture of complaints handling standards for the customer or the industry. The combination of the way in which firms define a complaint, apply that definition and report numbers, limits the validity of using FSA data to undertake a ‘firm by firm’ comparison” said Jenny Clayton, EMEIA Consumer Protection Leader at Ernst & Young.
Not all customer complaints are included in the published data, as firms do not have to report complaints that are satisfactorily dealt with by the next working day. Five of the firms surveyed use the FSA definition of a complaint but only one of these applies it strictly, with all of the others varying their application of the definition in practice. Three firms regard ‘any expression of dissatisfaction’ as a complaint and one uses a bespoke definition. There is also a wide range of processes for producing the official numbers that are reported to the FSA and the way in which that data is validated before submission also varies.
“In a hypothetical example, if we compare a firm that applies the full FSA definition, and so only counts complaints that have caused customers ‘material distress or inconvenience’, to a firm that applies ‘any expression of dissatisfaction’ throughout the process, the firm using the FSA definition would, in theory, record fewer complaints,” explained Jenny.
“Equally, if we compare a firm that does not remove invalid PPI complaints generated by claims management companies to a firm that does, the reportable numbers would look very different.
Additionally, if we compare the firms that theoretically use the ‘FSA definition’ but apply it in different ways, it is again not possible to compare complaint numbers accurately.”
The industry is committed to improving complaints handling...
As an industry financial services are committed to improving. The general consensus of those surveyed was that a minimum threshold for a fair outcome should be set at 95% with many firms looking to exceed this figure.
“The financial services industry is under pressure to restore public confidence in the role that it plays in society and it recognises that improving the quality of complaints handling and wider customer experience is integral to this process,” said John.
... despite a fast-changing landscape
As the consumer protection agenda moves forward under the FCA, and firms seek to engage with the customer through new channels, complaint handling will have to change rapidly.
Social media is influencing the way firms engage with customers, however the survey showed that the majority of firms do not yet use social media as a channel and that those who do look to engage with customers but not to manage complaints via social media.
A banking executive who was interviewed for the survey highlighted the challenges: “Inclusion of social media within the complaints model brings its own challenges. What are the legal implications of creating dialogue where the data sits outside the bank? How do firms ensure the right dialogue is taking place when the customer identity may be unknown and asking for it brings security risks?”
“The changing nature of consumers who wish to express dissatisfaction with ease, coupled with how quickly this dissatisfaction can go viral when not addressed, raises an interesting challenge for firms who must decide how to accommodate complaints raised within these channels and firms are going to have to start looking at their complaints handling as a whole, not just through the lens of the FSA definition,” said Jenny.
... and progress may be piecemeal unless a better benchmark is established
Jenny added: “We know that there is industry appetite for more accurate benchmarking of complaints handling - this study was undertaken at the request of a client and firms were keen to participate. A more accurate anonymous benchmarking system would put the FSA and FOS figures in context and help to make sure that best practice is shared, which will ultimately be to the benefit of consumers. Without sharing best practice, firms risk being pulled in different directions and overall progress in this area could be piecemeal for some time to come.”