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New rules will force financial firms to reveal complaints figures


Firms receiving the largest number of customer complaints will have to publish their own complaints figures by July 2010, according to plans revealed by the Financial Services Authority (FSA) this month.

The new rules will apply to firms that receive 500 or more complaints in the preceding six months. On current figures, this will affect just under 200 firms, accounting for around 95% of all complaints received.

The FSA will consolidate the information with anonymous complaints data from all other firms and publish an overview of the whole sector every six months.

The proposals are set out in a consultation paper published on 9th July. Dan Waters, the FSA’s director of retail policy and conduct risk, said:

"Transparency is an important regulatory tool. Publishing complaints data will mean that people can learn more about how firms handle complaints and the frequency with which they arise. 

"We also consider that publishing this information will incentivise firms to deal more effectively with complaints and help to raise industry standards in this important area." 

The information will follow the format of a new complaints return, which comes into force on 1st August. This divides complaints into five categories of business: banking; home finance; general insurance and pure protection; "decumulation" (retirement income), life and pensions; and investments.

The original plan was for the FSA simply to publish information from these returns. But questions arose as to whether the regulator had the right to do so, since the data would have been provided on a confidential basis. Getting firms to publish their own complaints figures every six months, however, avoids any problems about confidentiality, since the information will already be publicly available.

The FSA has also dropped a controversial proposal to make firms report how much they have paid out in compensation, as this would vary from claim to claim and might be misleading. Instead, firms will be required to note the number of complaints opened and closed, the percentage of complaints closed within eight weeks and the percentage of complaints upheld by the firm.

Complaints can be oral or written, as long as the customer alleges they have suffered or will suffer financial loss, material distress or material inconvenience. Mere expressions of dissatisfaction, say, in response to a customer survey, do not need to be reported. Nor do complaints that are resolved to the customer's satisfaction by the close of the next business day.

Aware that some firms might be tempted to under-report, the FSA says it will be comparing firms' figures with returns from previous years. The information will also be cross-checked against complaints data published independently by the Financial Ombudsman Service (FOS).

The FSA is currently working with the FOS on how to make the information easier for people to understand so that they can compare different firms of different sizes, for instance by presenting the number of banking and loan complaints per 1,000 relevant accounts, or general insurance and pure protection complaints per £1m premium.

To put the information into context, the FSA will also publish six-monthly reports, analysing general complaints trends and patterns across the sector. As a first step, it will shortly publish aggregated complaints data for the period between 2006 and 2008.

The consultation closes on 30th October. The FSA hopes to bring the new rules into force on 6th February 2010. Transitional arrangements, however, will mean firms will not have to publish their complaints information until 1st July 2010.

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