A survey of 96 firms, comprising most of the large retail groups
and a sample of other firms with business relevant to the retail
market, found that most firms had missed the March interim deadline
already.
The Treating Customers Fairly (TCF) initiative aims to bring
about a change in firms' behaviour towards customers. It required
firms to have management information in place to test whether they
are treating their customers fairly by March. By the end of
December they must be able to demonstrate that they are
consistently treating their customers fairly – though the FSA
believes that approximately 20% of the sample firms are no longer
capable of meeting that deadline.
FSA Director Sarah Wilson said that having appropriate
management information (MI) or other measures in place puts firms
in a position where they can measure the quality of the outcomes
they are delivering for consumers.
"These results show that adequate MI is not yet fully in place
in the firms assessed – it does not mean that they are treating
their customers unfairly," she said. "However, we now expect all
firms to maintain their momentum and to undertake a significant
amount of further work to meet the December deadline of
demonstrating that they are consistently treating their customers
fairly."
According to a report on the FSA survey, failures ranged widely
from those who "just missed" meeting the required standards,
through to firms that are now facing investigation and possible
enforcement action on the grounds of potential or actual consumer
detriment.
Despite the disappointing results, the FSA believes that "with
very substantial, continuing effort" approximately 80% of the
sample firms are still capable of meeting the final December
target. "All firms that failed to meet the deadline on time
have received a strong message that urgent progress is needed", the
report states.
TCF outcomes
The March deadline was intended to focus firms' minds on how
they would assess their performance against the six 'TCF outcomes'
for consumer customers:
- Consumers can be confident that they are dealing with firms
where the fair treatment of customers is central to the corporate
culture;
- Products and services marketed and sold in the retail markets
are designed to meet the needs of identified consumer groups and
are targeted accordingly;
- Consumers are provided with clear information and are kept
appropriately informed before, during and after the point of
sale;
- Where consumers receive advice, the advice is suitable and
takes account of their circumstances;
- Consumers are provided with products that perform as firms have
led them to expect, and the associated service is of an acceptable
standard and as they have been led to expect;
- Consumers do not face unreasonable post-sale barriers imposed
by firms to change product, switch provider, submit a claim or make
a complaint.
Good and bad practice
The FSA found that those firms that met or very nearly met the
required standards in March tended to be those where senior
management played an active role in setting out what the firm
needed to do.
These firms had built the fair treatment of customers into their
commercial strategy and in many cases tied it into individuals'
personal objectives, backed up by effective training and assessment
schemes. They also tended to be more proactive in obtaining
customer feedback and acting upon it.
Firms that simply claimed that they "always put customers first"
often assumed they were treating customers fairly but could not
always show how they knew this, the report said. In many cases,
firms failed to realise how much work was required to implement TCF
measures and simply left it too late. Others swamped senior
management with information that had not been properly
analysed.
Many firms reported on their TCF processes but did not give
enough thought as to whether these were really measuring the fair
treatment of customers. They might, for instance, be able to show
that all customer complaints were answered promptly, but not
whether the way they responded to complaints was fair.
Many took great pride in high levels of customer satisfaction
but their customer surveys were not always asking the right
questions. Firms should not confuse satisfaction with fairness,
warned the FSA.
"Underlying questions being asked were nothing to do with
fairness," said the report. "For example, ‘was the branch clean
when you walked in?’."
Even where customer surveys were focused more on fairness, the
FSA observed that "they asked questions that customers were
unlikely to be able to answer effectively. For example, ‘were you
satisfied you had all the risks properly explained to you?’."
Next steps
The report says that by the end of the year, firms must be able
to "demonstrate that senior management have instilled a culture
within the firm whereby they understand what the fair treatment of
customers means; where they expect their staff to achieve this at
all times; and where (a relatively small number of) errors are
promptly found by firms, put right and learned from".
Firms must be able to measure their performance on TCF issues
and show that they act on the results, be able to demonstrate that
they are delivering fair outcomes to customers and have "no serious
failings".
The FSA plans a report on the December deadline in September
2009. After that, the TCF initiative will end and treating
customers fairly will become part become of firms' normal
compliance regime.
Want more content like this? This story was written by the insurance and reinsurance legal experts at Pinsent Masons, the law firm behind OUT-LAW.COM. See our legal info for Insurance and Reinsurance.
