201504 CM April

CONSUMER CREDIT
CONTINUED
•
the response of RBS and NatWest to
concerns raised by the FCA was said to
be ‘poorly planned, under-resourced and
not subject to adequate oversight and
governance’;
•
YBS staff needed to be adequately
trained, sufficiently skilled and provided
with appropriate guidance to ‘proactively
engage with ... customers to ascertain
the cause of their payment difficulties and
their future financial prospects’;
•
YBS moved customer facing staff to
oversight and quality assurance duties
without replacements, thereby increasing
delays in contacting customers in
arrears which the FCA viewed as unfair
treatment;
•
senior management at RBS and NatWest
were absent from the working group
tasked to address the issues raised, and
managers delegated to their juniors. The
FCA concluded that no senior manager
had taken responsibility and there had
been little meaningful challenge or
scrutiny of the group’s work;
•
weaknesses in quality assurance and the
provision of management information
contributed to a slowness to implement
improvements at YBS and was viewed
by the regulator as an aggravating factor
when considering the seriousness of
these failings.
Complaints and redress
It is essential to have in place effective
and transparent procedures to handle
complaints under FCA Dispute Resolution:
Complaints manual (DISP) 1.3. The
YBS final notice reminds all firms that a
customer need not necessarily use the
word ‘complaint’, but it can be any oral or
written expression of dissatisfaction about
a firm’s financial services. There must also
be an assertion that the customer has
suffered financial loss, material distress or
inconvenience. This means that staff need
to be trained to identify and acknowledge
customer complaints, otherwise they may
go unrecorded and un-investigated.
The FCA found, for example, that one
YBS customer had repeatedly complained
that the sale process was too slow, causing
her distress and depression. Apart from
the failure to comply with complaints
handling rules, senior management need
the management information generated
from complaints data to inform them in the
exercise of their responsibilities. Complaints
information brings failings in processes and
procedures to the attention of managers
allowing corrective action to be taken.
Where failings occur, any remediation
and redress provided, particularly if
voluntary, will be relevant to the FCA’s
assessment of an appropriate sanction.
The RBS and NatWest final notice views
as a mitigating factor that both banks
agreed to contact customers to identify and
address any customer detriment arising.
In relation to mortgage arrears that were
incorrectly applied to customer accounts,
YBS voluntarily refunded all administration
fees over a five-year period. While redress
often exceeds the amount of the fine, and
for YBS was expected to reach £8.4 million
in respect of 33,000 plus customers, it
received credit (albeit unquantified) for
taking steps to proactively compensate and
for having done so in a transparent manner
by posting details on its website.
Key lessons
Senior management and compliance, to
the extent they have not already done so,
should review product life cycles from the
perspective of customers and test them
against the six TCF outcomes. They should
also consider whether certain customers
might be vulnerable and what adjustments
should be made to ensure they are treated
fairly.
Staff need to pro-actively engage with
customers in difficulties or arrears, identify
the problem, the prospects for payment and
tailor solutions to their circumstances which
may include repossession. And where
appropriate, ensure staff obtain sufficient
customer information to provide advice
Staff need to 0
pro-actively engage with
customers in difficulties
or arrears, identify
the problem, the
prospects for payment
and tailor solutions to
their circumstances
which may include
repossession ...
– ROSANNA BRYANT
tailored to their circumstances.
Firms should check that processes and
procedures are in place to demonstrate that
regulatory requirements and standards have
been met. At the same time firms should
confirm that management information is
being collected during the product journey,
and in particular, that complaints are
identified and their value as a management
tool is recognised and acted upon.
Where failings are identified, whether
from internal processes or externally (e.g.
an FCA supervisory visit), remedial action
(providing redress) should be taken with
sufficient resource allocated and senior
management ownership.
Senior Management Accountability
Senior management should also be alert
to the increasing risk that they may be
held personally accountable. The FCA’s
Statement of Principles for Approved
Persons, for example Principles 6 and 7,
require those exercising significant influence
functions to exercise due skill, care and
diligence in managing the business for
which they are responsible and to take
reasonable steps to ensure that it complies
with the requirements and standards of
the regulatory system. Enforcement action
has recently been taken against former
executives at Swinton Insurance who failed
to consider customers’ best interests and
treat them fairly.
Rosanna Bryant is a Partner in Addleshaw
Goddard’s Financial Services Group.
rosanna.bryant@addleshawgoddard.com
36
April 2015 www.cicm.com
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