The Financial Conduct Authority has unveiled proposals to streamline the way firms report complaints data, in a move that could benefit around 10,000 regulated firms and enhance the regulator’s ability to identify consumer harm.
The plans, announced today, would see five separate complaints reporting returns consolidated into a single, standardised submission. The FCA says this will not only make it easier for firms to provide the required data but will also improve the quality and timeliness of the information it receives.
FREQUENCY RESPONSE
Under the proposals, the frequency of data submissions would also be aligned across the industry, with the aim of introducing greater consistency and predictability. The regulator believes this change will enable firms to plan better for compliance and allow the FCA to process returns more efficiently, ultimately helping it act more swiftly where there is evidence of consumer detriment.
The initiative comes as part of the FCA’s ongoing focus on improving supervisory tools in line with the principles of the Consumer Duty, which places greater emphasis on outcomes and proactive oversight.
RISK MITIGATION
Dom House, lead consultant at Simplify Consulting, welcomed the announcement, calling it “a step forward for complaints processes”. He said that reducing the reporting burden would lessen the risk of mis-reporting and allow firms to focus more on how complaints data can inform broader business strategy.
“In addition, and perhaps the biggest improvement in how complaints are viewed across the industry is that this will enable complaints data to be processed more efficiently by the FCA,” he said. “As data becomes more important across the industry, and at the FCA itself, improvements to the quality and availability of the data should enable firms to make better and smarter comparisons with where they sit within the market and against their peers.”
Although House acknowledged that complaints volumes fell slightly in the second half of 2024 to 1.78 million – a 4.3% drop on the first half of the year – he said the figures remain “disappointing overall”. His comments reflect a broader concern that, despite the introduction of Consumer Duty nearly two years ago, the financial services sector has yet to make significant progress in reducing complaints.
“Complaint volumes across all FCA regulated firms have continued, on average, to increase over the last 10 years,” he said. “Now, around 22 months into Consumer Duty, it seems the industry is still to move the dial significantly when it comes to customer complaints.”
DISSATISFACTION REACTION
Simplify Consulting’s own research suggests that customer dissatisfaction is having a tangible commercial impact, with 76% of complainants saying it affected their loyalty to their provider and 18% having switched providers as a direct result of a complaint.
House added that firms which go beyond compliance and take a strategic approach to complaints handling are more likely to improve customer outcomes and reduce attrition.
“To my mind, financial firms that can build an effective complaints strategy, analysing the root cause of complaints rather than relying on over-arching regulation, will not only be delivering better outcomes for clients and be meeting Consumer Duty requirements, they might well reduce the risk of losing a large proportion of their clients.”
The FCA’s consultation is open until later this year, with changes expected to be implemented following industry feedback.
