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Financial Services analysis: With the Financial Ombudsman Service (FOS) handling more than 2 million complaints and queries a year, Tony Boorman, deputy chief ombudsman at the FOS, discusses the experiences of 2013 and what financial services firms can do to build consumer trust in 2014.
How do you feel the sector is faring in the eyes of the public?
People's trust in financial businesses certainly seems to hit new low points every time you read the papers. Good news about consumer finance is short on the ground. A lot of that bad news has little if any impact on the real service that you and I receive as customers of insurers, banks and advisers. However, there must be a concern that for many customers it seems that this is an industry that cannot always be trusted.
Trust in any relationship is easy to lose and hard to re-establish. We see the impact every day in our complaint post bag: 'can I trust my provider when it tells me that I have been treated fairly--after all, this is the institution that has been all over the papers because...'
I think there is general agreement that after the experiences of the past few years the key challenge for the whole industry is to begin to restore that trust and rebuild often distinctly tattered corporate reputations. That won't be easy. There is certainly no magic bullet but, in our experience, businesses that listen carefully and openly to unhappy customers can be ahead of the curve. In contrast, those that resort to law (seldom an attractive way of relating to consumers, I fear), or 'procedures', will miss the valuable lessons that are there to learnt.
Do you feel the Ombudsman has sufficient powers to deal with regulatory breaches?
The recent amendments to the Financial Services and Markets Act 2000 gave the FOS important new formal responsibilities to alert the regulator to major problems. Feeding back to the industry and its regulators what we see has always been an important part of our role that we take seriously--but it's good to see it underpinned in statute.
I welcome the clear readiness of the Financial Conduct Authority (FCA) to step in to resolve problems before they develop into major scandals. From an industry perspective, stepping in is seldom a popular move for a regulator. However, it surely has to be better than letting a major problem grow and become truly poisonous--as happened with payment protection insurance (PPI).
The FOS's primary concern, however, isn't with regulatory breaches. Rather it's ensuring that individual customers have been treated fairly--and here normal consumer law and plain old common sense are often at least as important as Handbook provisions.
What is your impression of the developments to financial regulation in 2013 (and looking forward to 2014)?
This was always going to be an interesting year with the significant changes in financial regulation coming into effect on 1 April 2014. The regulator has put a lot more effort than its predecessor in tackling a number of issues over the course of the last six months, whether this is dealing with ongoing concerns such as PPI, or investigating new problems that have come to light.
The transferring of consumer credit regulation from the Office of Fair Trading to the FCA is the big thing to look forward to in 2014. The good news is that it should mean stronger protection for consumers who use products provided by consumer credit licensees.
However, I think the big issue for the next period will be to understand how far--by promoting competition that works for consumers--problems can be handled without the need for more and more detailed regulatory interventions.
How can financial services firms develop an appropriate relationship with the Ombudsman?
One of our biggest challenges is getting businesses to understand our approach to complaint handling. We tend to use the same principles of 'fair and reasonable' when investigating all complaints, and it is disappointing that some business still do not seem able to grasp this.
We provide a great deal of information to help businesses better understand our approach, whether this is on our online technical resource on our website, our newsletter ombudsman news or, more recently, the publication of ombudsman decisions. We are also always happy to discuss our approach and provide guidance around what we would expect in a given set of circumstances.
In addition, by following our approach to complaint handling, financial businesses are likely to find that they have fewer cases referred to the ombudsman.
What changes would you most like to see in the general approach taken by financial services firms?
We have long believed that embracing customer complaints and treating them as free feedback is a great way to build trust in your work. Behind each complaint is a customer who is unhappy with the service they have received. Rather than shunting them off under a compliance function, our experience shows that by satisfactorily resolving their concerns, you not only have a happy customer, but you also benefit from a powerful advocate of your business.
We see far too many complaints where, due to the consumer's problems not being taken seriously, the relationship between the business and their customer has broken down to the point where the two parties are no longer communicating. However, following a little bit of investigation on our part, we find that all the consumer wanted was someone to appreciate their concerns and assure them that the business would try to prevent it happening again.
By listening to their customers and making genuine efforts to resolve their concerns, businesses can take the first tentative steps in rebuilding the trust that has eroded in recent years to the benefit of their wider reputation.
Interviewed by Neasa MacErlean.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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