FSCA finds banks do not handle consumer complaints properly

The Financial Sector Conduct Authority (FSCA) found in a desktop review that banks generally do not handle consumer complaints properly. They had no satisfactory complaints management processes and failed to meet the Conduct Standard for Banks.

The Financial Sector Conduct Authority (FSCA) has published the findings of a thematic review conducted across the banking sector, providing key insights into the alignment of banks’ complaints management processes with regulatory requirements.

As the market conduct regulator of financial institutions in South Africa, a key part of the FSCA’s mandate is to protect financial customers by promoting their fair treatment by financial institutions, including banks.

The FSCA supervises efforts to improve industry practices and promote the fair treatment of financial customers and, therefore, conducted a sector-wide review to assess if banks’ complaints handling arrangements deliver fair outcomes for complainants as required by the Conduct Standard for Banks that came into operation in July 2021.

The Conduct Standard for Banks sets out various requirements for the fair treatment of financial customers by banks. Section 8 of the Conduct Standard for Banks outlines detailed requirements for complaints handling at banks.

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FSCA review of banks shows not all of them comply

The FSCA says the review, conducted between 18 July and 17 November 2022 among 23 banks, focused on key areas such as the categorisation of complaints, quality of record-keeping, customer communication and disclosure of information regarding the rights of aggrieved complainants to approach the relevant financial ombud schemes.

“While several banks took significant steps to improve their complaints handling processes and bring them in line with regulatory requirements, some challenges and inconsistent practices continue to be observed across the sector,” the FSCA says.

These key challenges identified include:

• Inconsistencies in the categorisation of complaints, resulting in inaccurate reporting
• Deficiencies in record-keeping affecting effective oversight and decision-making
• Failure to keep complainants informed and a lack of transparency in decisions
• Limited disclosure regarding the availability of ombud redress mechanisms reduces the ability of complainants to pursue alternative recourse options.

According to the FSCA, the initial stages of the review revealed that the majority of banks exhibited unsatisfactory complaints management processes across the assessed requirements. Considering this observation, the FSCA informed banks how important it is to align their processes with the principles outlined in section 8 of the Conduct Standard. The banks were encouraged to take remedial action as soon as possible.

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Findings of FSCA review of banks

The FSCA found in its desktop review that:

• 60% of banks failed to meet the section 8(7) requirement that requires the accurate classification of complaints according to specified minimum categories and were subsequently rated as unsatisfactory.
• Conversely, only 40% of banks were compliant and demonstrated adequate and accurate categorisation practices.
• 85% of banks were assigned an unsatisfactory rating regarding the accurate, efficient and secure recording of complaints-related information, including the obligation to maintain comprehensive records for each reportable complaint received from retail complainants.
• 70% of banks did not satisfy the section 8(15) requirement, which stipulates that a bank must maintain data regarding reportable complaints received and categorised in accordance with subsection 7. The general lack of oversight of overall complaints’ statistics is concerning and a possible impediment to the effective management of complaints by banks, the FSCA says.
• Only 15% of banks ensured the accuracy, efficiency and secure recording of complaint-related information
• 92% of banks failed to keep complainants adequately informed of the progress of their complaints, as stipulated in section 22 of the Conduct Standard for Banks
• All the banks fell short of ensuring that complaints handling processes cater to effective communication strategies to ensure that complainants are kept informed of the process followed and the outcome of their complaints, as well as the availability and contact details of the relevant ombud services during all relevant stages of the customer relationship.
• 92% of the banks did not comply with section 8(13) as they did not provide clear and adequate reasons for the rejection of complaints, nor details of any applicable escalation or review processes, including how to use them as well as the applicable timelines.

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FSCA review of banks shows where they can improve

The FSCA says results of the desktop review indicate areas of non-compliance and serve to guide banks in taking the necessary steps to comply with requirements outlined in section 8 of the Conduct Standard, as well as improving the overall customer experience.

Therefore, the FSCA recommended that banks improve aspects of their complaints handling, such as categorising complaints, record keeping of relevant evidence, decision and statistics and alignment of customer details on complaints registers with details on their customer database.

In addition, the FSCA advised banks to notify financial customers about the status of their complaints, progress and decisions made in resolving complaints and about unforeseen delays.

After the review, the FSCA says it noted that banks enhanced and/or started implementing good complaints management practices, such as:

• overhauling their complaints management processes, including the implementation of systems and frameworks to improve customer experience during the process while ensuring fair outcomes for complainants
• developing and implementing robust training interventions to operationalise the complaints management framework and policies
• reviewing internal complaints escalation processes, including communicating with complainants.

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FSCA recommendations for banks to improve complaints handling

Given the overall finding that none of the sampled banks were found to comply with all the relevant sections assessed satisfactorily, the FSCA recommended that banks improve their complaints handling processes and consider:

• Correctly categorising customer complaints, which will assist in conducting robust root cause analysis and improve measures put in place to mitigate reoccurrence in the future.
• Keeping copies of all relevant evidence, correspondence and decisions as required and putting measures in place to ensure that employees keep a record of all correspondence regarding complaints and that all communication with complainants is recorded and easily retrievable.
• Ensuring that complaints registers indicate whether the complaint resolution status falls within or outside set timelines.
• Ensuring that there is an alignment between the customer details captured on their complaints registers and what is captured on their systems.
• Reviewing their processes to include effective communication of the internal complaints’ escalation process.
• Ensuring that the details of the relevant Ombud are clearly communicated to customers at all relevant stages of the product life cycle.
• Ensuring that the complaints statistics are accurately recorded.