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  1. Point in time
    2006-02-01

SIFA 11.1 How to handle a complaint

SIFA 11.1.1 G

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.

SIFA 11.1.2 G

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.

SIFA 11.1.3 G

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.

SIFA 11.1.4 G

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.

SIFA 11.1.5 G

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).

SIFA 11.1.6 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.

SIFA 11.1.7 G
SIFA11.1.7graphic_G1

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.

SIFA 11.1.8 G

If the internal handling of complaints is inadequate, fewer complaints will be resolved at the earliest opportunity and the number of unresolved complaints that are referred to the FOS will increase. The FSA will act where it finds weaknesses in complaint handling that put consumers' interests at risk.

When and where should you publicise your procedures?

SIFA 11.1.9 G

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.

How quickly do you need to deal with a complaint?

SIFA 11.1.10 G

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:

SIFA_chapter_11_0001_310806
SIFA 11.1.11 G

The steps are explained in more detail below:

Step 1

Within five business days

  • send a copy of your internal complaints procedures; and
  • inform them who will be handling the complaint; or
  • inform the complainant of the referral by way of a final response and include the other firm's contact details.

Step 2

Within four weeks

Send a final response - including:

(It should be a separate document and written in plain English)

  • a summary of the complaint;
  • details of any offer made;
  • right your client has to go to the FOS;
  • a copy of the leaflet about the FOS - 'your complaint and the ombudsman';
  • a summary of your investigation;
  • the time limit on any offer made; and
  • the six-month time limit for referrals to the FOS.

Or send a holding response

Explaining why you are not yet in a position to resolve the complaint and indicating when you will make further contact with the client.

Step 3

Within eight weeks

Send a final response

As per the details in step 2 above.

Or a response explaining:

  • why you are not able to respond;
  • when you expect to provide a final response;
  • explaining that the client is entitled to refer the complaint to the FOS if unhappy with the delay;
  • the reasons for the delay;
  • giving a copy of the leaflet about the FOS - 'your complaint and the ombudsman'; and
  • the six-month time limit for referrals to the FOS.

SIFA 11.1.12 G

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).

SIFA 11.1.13 G

On receiving a complaint referred by another firm, the standard time limits will apply from the date on which the firm receives the referral. In particular, the firm must send a written acknowledgement to the complainant within five working days. A firm should copy this acknowledgement to the firm that made the referral.

Exception to the rules: quick resolution of complaints

SIFA 11.1.14 G

If you manage to deal with a complaint by the end of the next business day after receiving it, there is no need to supply your client with a copy of the complaints procedures.

SIFA 11.1.15 G

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

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

Charging customers for handling their complaints

SIFA 11.1.16 G

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.

SIFA 11.1.17 G

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.

SIFA 11.1.18 G

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.

Cooperation with the financial ombudsman service

SIFA 11.1.19 G

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

SIFA 11.1.20 G

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).

Mortgage endowment complaints

SIFA 11.1.21 G

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

Where are the relevant Handbook sections?

SIFA 11.1.22 G

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.

Record keeping requirements

SIFA 11.1.23 G

You must keep records for a minimum of three years from when you receive a complaint (DISP 1.5.1 R). This is so that you meet our requirements and are able to co-operate with the FOS if it asks for information about a complaint that is later referred to it. These are minimum requirements and you may decide to keep material for longer.

Information about a complaint that you should keep:

The name of the complainant.

The substance of the complaint.

Copies of correspondence between your firm and the complainant.

Details of any redress offered by your firm.

Documentation relating to the referral of a complaint

The following section of the Guide is also relevant:

'Complaints reporting to the FSA' - Chapter 11.2

If you do mortgage or general insurance business you should also refer to MIGI 14 .

SIFA 11.2 Complaints reporting to the FSA

SIFA 11.2.1 G

You will need to send in a complaints return: unless your firm only conducts business with clients that are not eligible complainants (which, as a small personal investment firm, would be very unlikely).

Why do you need to submit a complaints report?

SIFA 11.2.2 G

We collect complaints data to assist us in monitoring firms and their regulatory compliance.

When are the reporting periods?

SIFA 11.2.3 G

You must send a return to us twice each year. The reporting periods are:

  • the six months immediately following a firm's accounting reference date; and
  • the six months immediately preceding a firm's accounting reference date.

SIFA 11.2.4 G

Returns have to be sent to us within 30 business days of the end of the relevant reporting period.

SIFA 11.2.5 G

All firms will have to collect complaint data in the new reporting format from 1 April 2005. However, we only expect firms to submit complaints data to us electronically from 1 July 2005. This means that data for the period 1 April 2005 to 30 June 2005 should be included in a firm's first return after 1 July 2005.

How do you submit a report?

SIFA 11.2.6 G

The returns will be submitted via the Firms Online system within 30 business days of the reporting period end date. Complaints returns are not part of the Retail Mediation Activities Return (RMAR) but will be submitted in the same way. The format of the return may be found at DISP 1 Annex 1 R.

  • The returns are in a grid format that allows analysis of complaints by product and complaint type. There are separate returns for private individual complaints and small business complaints.
  • The returns also require information covering all customers of: the number of complaints considered, complaints upheld, complaints referred to the FOS, complaints resolved (and the time taken), outstanding complaints and the amount of redress paid.

Where are the relevant Handbook sections?

SIFA 11.2.7 G

The following sections of the Dispute Resolution: Complaints (DISP) sourcebook are relevant:

  • an explanation of what an eligible complainant is: DISP 2.4.3 R;
  • the reporting periods: DISP 1.5.6 R;
  • the Financial Ombudsman Service funding rules: DISP 5; and
  • how to notify the FSA if you do not conduct business with eligible complainants: DISP 1.1.7 R to DISP 1.1.8 R.

The following sections of the Guide are also relevant:

'How to handle a complaint' - Chapter 11.1

'Reporting requirements' - Chapter 12.1