SIFA 11.1 How to handle a complaint

There are many reasons why clients complain to firms. Typically, complaints arise where:

• a firm makes unexpected or excessive charges; or
• a firm does not draw attention to a particularly strict condition in a contract; or
• a firm does not give a client adequate notice about changes to a contract; or
• a client loses money because of a firm's slow administration; or
• a firm does not warn a client adequately about the risks of a product.

If you receive a complaint from or on behalf of an eligible complainant (usually a private customer) about your firm's providing - or failing to provide - a financial service, you will need to follow certain procedures.

An example of an eligible complainant is an individual who is classified as a private customer. Individuals who are private customers can refer a complaint to the Financial Ombudsman Service (FOS) if they are unhappy with a firm's final response.

Your internal complaints-handling procedures must cover:

• receiving complaints;
• responding to complaints;
• referring complaints to other firms;
• the appropriate investigation of complaints; and
• notifying complainants of their right to go to the FOS, where relevant.

A firm must have appropriate management controls to ensure that its complaints handling is managed effectively. The oversight of a firm's compliance must be allocated to a director or senior manager (SYSC 3.2.8 R). Your literature and correspondence relating to complaints should be in clear and plain language (DISP 1.2.14 G).

You must have in place and operate appropriate and effective internal complaint-handling procedures

• for handling any expression of dissatisfaction, whether oral or written, justified or not;
• for referring to another firm, expressions of dissatisfaction about that firm's services if you market (or have marketed) that firm's financial services or if your financial services are marketed by the other firm (DISP 1.2.1 R); and
• the procedures must be written down.

If you receive a complaint that is the responsibility of another party to the transaction, you must have procedures in place to refer it to the appropriate party rather than simply reject it. See DISP 1.4 for more information.

You should publicise your procedures in the following ways:

• You must display a notice stating that the FOS covers your firm. The notice should be displayed in all of your branches or offices that your customers have access to.
• Customers should be informed in the firm's IDD what to do if they have a complaint (or in its terms of business if that is provided on first contact with the customer).
• At or immediately after the point of sale, your firm must refer your clients in writing to the availability of your internal complaint-handling procedures - for example, in your terms of business.
• If you receive a complaint (unless it is resolved by close of business the next day) or receive a request for a copy of the procedures, you must supply a copy of the complaint-handling procedures to the complainant.
• All of your employees should be aware of the procedures.

You will want to resolve complaints quickly and efficiently, although the length of time that it will take you to investigate a complaint may vary. There are fixed periods within which you have to inform your client of your progress:

Where a firm has reasonable grounds to be satisfied that another firm may be solely or jointly responsible for the fault alleged in a complaint, it may refer the complaint to that other firm. If it does so, it must refer the complaint promptly and - in any event - within five business days of the date when it became satisfied that the other firm may be responsible for the subject matter of the complaint (DISP 1.4.18 R).

Complaints that are resolved by the next business day do not fall under the requirements for:

• time limits; or
• record keeping; or
• reporting.

Any provision seeking to charge customers, or to recover costs, for dealing with complaints before the FOS, is unjustifiable, as this could deter customers from exercising their right to refer the dispute to the FOS. In most circumstances we would consider such a clause in a firm's terms of business to be unfair under the Unfair Terms in Consumer Contracts Regulations. In addition, such a clause is, in our view, inconsistent with Principle 6 of the FSA's Principles for Businesses, which requires that you must pay due regard to the interests of its customers and treat them fairly.

We recognise that frivolous or vexatious complaints may raise unnecessary administrative burdens for both firms and the FOS alike. In these circumstances, we think it would be legitimate for firms, through their terms of business, to seek to reclaim costs and expenses reasonably incurred by the firm as a result of defending these complaints through the FOS.

The question of what is frivolous or vexatious would need to be determined on a case-by-case basis and is likely to be a very small minority of cases. In our view, if the FOS did not dismiss a case during its initial review on the grounds in DISP 3.3.1 R (2), the claim should not be regarded as frivolous or vexatious.

A firm must cooperate fully with the FOS in the handling of complaints against it (DISP 1.6.1 R).

Cooperation with the FOS includes, but is not limited to:

• producing requested documents;
• adhering to any specified time limits;
• attending hearings when requested to do so; and
• complying promptly with any settlements or awards (DISP 1.6.2 R).

We sent two Dear CEO letters to larger firms in April 2002 and January 2004. These letters set out the kind of investigation and standards that we expect in mortgage endowment complaint handling. You can find these letters on our website under FSA Library and Communication Documents:

www.fsa.gov.uk/pubs/ceo/ceo_letter_4apr02.pdf

www.fsa.gov.uk/pubs/ceo/ceo_letter_23jan04.pdf

Complaints-handling procedures are explained fully in Chapter 1 of the Dispute Resolution: Complaints sourcebook (DISP). The sections cover:

• the general and additional requirements: DISP 1.2;
• additional requirements for internal complaint-handling procedures: DISP 1.3;
• the time limits for dealing with a complaint: DISP 1.4; and
• who should deal with a complaint: DISP 1.2.16 R.