UK financial firms could be required to report all consumer complaints to regulator

As a result of its recent review of how complaints are handled, the FCA has proposed extending to three days the period during which less complex complaints can be resolved without the need for a formal letter. However, firms will be required to report all complaints to the FCA to "improve transparency", along with the causes and categories of complaints. This information will then be published by the regulator alongside details about the size of firms.

The regulator also intends to ban the use of premium rate telephone numbers by firms as a means of customer contact, and is considering the introduction of a 15 year 'long stop' time limit by which any complaints must be made to the Financial Ombudsman Service (FOS). It is now consulting on its proposals until 13 March 2015 and hopes to introduce the changes in March 2016.

"Consumers want a simple way to complain that does not leave them out of pocket, and they want to be assured that their concerns will be dealt with fairly and quickly," said Christopher Woolard, the FCA's director of policy, risk and research. "These proposed reforms will further improve the system, making it less bureaucratic for firms, easier for consumers and will provide us with improved intelligence on complaints."

Under the current rules, firms do not have to send a letter to customers whose complaints are dealt with by the end of the next business day. However, those customers could then have to wait up to eight weeks before they are permitted to refer a complaint to the FOS for final resolution if they are not satisfied with the firm's response. The FOS is the industry-funded independent body which deals with complaints by individual consumers against financial services companies which cannot be resolved through that company's own procedures.

The FCA has proposed extending the less formal resolution period from one business day to three business days, enabling them to resolve matters faster without becoming bogged down in "unnecessary procedure" if the one business day deadline is missed. Although firms would not be expected to issue a formal resolution letter, they will however have to inform customers in writing of their right to refer the complaint on to the FOS. In addition, customers would be entitled to make a referral immediately after receiving the firm's response.

Currently, firms are only required to report more complex complaints in which a final response letter, which must be sent within eight weeks, is issued to the customer explaining the firm's decision. In its consultation paper, the FCA said that this policy meant that the "majority" of complaints received by firms were unreported.

"This provides an incomplete picture and significantly reduces our ability to make accurate comparisons between firms' complaint handling, to inform our thematic reviews or to undertake other supervisory tasks," the FCA said. "There is also a high degree of overlap between the types of complaints handled before and after the close of the next business day, which means there may be only an arbitrary distinction as to whether or not a complaint is reported. Some serious issues remain unreported simply because they are resolved quickly."

"We are also aware that some firms are aiming to handle an increasing number of complaints within the next business day unreported period – without this change we risk hearing about a diminishing fraction of overall complaints. Furthermore, if we extend the next business day period to three business days, as we propose to do, a significant number of complaints that previously would have been dealt with in the formal eight-week period may now be handled within the less formal period," it said.

As well as incorporating the response to its thematic review of firms' complaints-handling, the changes that the FCA is consulting on are also intended to implement the requirements of the EU's Alternative Dispute Resolution Directive (ADRD). The FCA is proposing to keep current time limits for referring complaints to the FOS as they already comply with the requirements and provide a sufficient level of consumer protection. However, the rules will be amended to require firms to tell customers whether they will consent to the FOS considering a complaint made outside of the usual time limits when responding to a particular complaint.