DISP App 3.4 Root cause analysis

1This section applies to both step 1 and step 2, as appropriate.

DISP 1.3.3 R requires the firm to put in place appropriate management controls and take reasonable steps to ensure that in handling complaints it identifies and remedies any recurring or systemic problems. If a firm receives complaints about its sales of payment protection contracts it should analyse the root causes of those complaints including, but not limited to, the consideration of:

1. (1)

   the concerns raised by complainants (both at the time of the sale and subsequently);

2. (2)

   the reasons for both rejected claims and complaints;

3. (3)

   the firm's stated sales practice(s) at the relevant time(s);

4. (4)

   evidence available to the firm about the actual sales practice(s) at the relevant time(s) (this might include recollections of staff and complainants, compliance records, and other material produced at the time about specific transactions, for example call recordings and incentives given to advisers);

5. (5)

   relevant regulatory findings; and

6. (6)

   relevant decisions by the Financial Ombudsman Service.

Where consideration of the root causes of complaints suggests recurring or systemic problems in the firm's sales practices for payment protection contracts, the firm should, in assessing an individual complaint, consider whether the problems were likely to have contributed (at step 1) 1to a breach or failing or (at step 2) to a failure to disclose commission 1in the individual case, even if those problems were not referred to specifically by the complainant.

Where a firm identifies (from its complaints or otherwise) recurring or systemic problems in its sales practices for a particular type of payment protection contract, either for its sales in general or for those from a particular location or sales channel, it should (in accordance with Principle 6 (Customers' interests) and to the extent that it applies), consider whether it ought to act with regard to the position of customers who may have suffered detriment from, or been potentially disadvantaged by such problems but who have not complained and, if so, take appropriate and proportionate measures to ensure that those customers are given appropriate redress or a proper opportunity to obtain it. In particular, the firm should:

1. (1)

   ascertain the scope and severity of the consumer detriment that might have arisen; and

2. (2)

   consider whether it is fair and reasonable for the firm to undertake proactively a redress or remediation exercise, which may include contacting customers who have not complained.