Dispute Resolution: Complaints in the FCA Handbook (DISP)
Following on from last week’s look at CONC, this week we’re going to examine DISP, the section of the FCA Handbook that sets out how firms should handle and resolve complaints about regulated activity.
DISP is divided into three main chapters:
Treating Complainants Fairly
Jurisdiction of the Financial Ombudsman Service
Complaint handling procedures of the Financial Ombudsman Service
There are also further sections that are only applicable to some firms: the Standard Terms – which sets out how complaints against VJ participants are dealt with under the Voluntary Jurisdiction - an appendix on handling mortgage endowment complaints, an appendix on handling payment protection insurance complaints, and transitional provisions and schedules.
Which sections apply to which firms and how, depends on the type of firm and the type of business the firm conducts and this requires a decent in-depth knowledge of DISP. For example, UCITS management companies should be aware that just because they may not have any complainants that fit the definition of ‘eligible’ complainants doesn’t mean they don’t still need to handle complaints in line with DISP 1.
For most firms, it’s Chapter 1 – that sets out how firms should deal with, record, and report their complaints - that will have most bearing on the business. Firms need to be very clear on what type of activity their firm undertakes; this has a clear impact on which parts of DISP 1 apply, particularly when it comes to reporting to the FCA and publication rules.
Chapter 1 begins with a short section designed to broaden consumer awareness about the right to complain, how to exercise that right, and the right to seek further action. As part of this, complaints procedures and policies should be easily accessible to consumers, written in clear and concise language, and the procedure itself should be transparent. Whilst information on the procedure should be readily available for any consumer to find, firms must make consumers aware of this information at the point of sale, and should send the information to the complainant along with the acknowledgement of a complaint. Firms also need to make information about the FOS easily accessible and available.
A customer should be able to complain by ‘any reasonable means’; in practice this means by telephone, e-mail, by letter, and increasingly, by social media, particularly if a firm uses social media heavily and where a customer could reasonably expect to be able to contact the firm in this way. Whatever method the customer uses, they must be able to submit a complaint free of charge. DISP rules state that firms must ensure that freephone or standard charge numbers only are used, not premium rate lines, or any line that adds to the firm’s revenue.
DISP 1 - Complaint Resolution Rules
Arguably the section that most impacts day-to-day business is the complaints resolution rules, which clearly set the expectation that firms investigate complaints competently, diligently and impartially, and assess the complaint fairly, consistently and promptly. What this means is that each case needs to be considered on its merits, and informed by the knowledge and judgement of its experienced complaint handlers, particularly in the case of recurring types of complaints.
Complaint handlers don’t just need to be experienced in investigating and determining complaints, they need a good understanding of the products and services the firm offers to inform their assessment of the complaint. Firms will hope that most complaints are without grounds, but where they should be upheld, the complaint handler will play a crucial role in making a decision on redress or compensation that could make the difference for the customer, and for customer loyalty.
In most cases, complaints are of the sort that can be resolved quickly, sometimes at the point the complaint is made. DISP accounts for this, and sets out rules for these types of complaints. In short, they should be recorded and a summary resolution communication should be sent to the complainant promptly (as best practice, usually within five days of resolution) that confirms the firm considers the complaint resolved, and includes information about the FOS, should the complainant decide to take it further.
Where some investigation is needed, then firms should send a prompt acknowledgement of the complaint, including information on the firm’s complaint handling procedures. The FCA expects most firms to have concluded their investigations and to have made a decision within eight weeks. In these cases, firms need to send a final response, which clearly indicates the decision of the firm to either accept or reject the complaint, plus any redress or action.
Some cases do take longer than eight weeks to investigate – although these should be few and far between - especially where there are complex circumstances or where a lot of information or documentation is considered. Firms still need to write to the customer at the eight week point, indicating when they expect to be able to make a final response, and let the customer know they can now take their case to the FOS.
DISP 1 - Reporting and Recording
The rest of DISP 1 deals with reporting and recording. Firms must maintain a record of all complaints for at least three years (five years in the case of collective portfolio management services for a UCITS scheme). Firms must submit a report to the FCA about their complaints, including the number received, the root cause, how many were closed or upheld, and the total amount of redress paid.
Firms should also be aware that if they reach 500 complaints in a report (1000 for firms with permission to carry on only credit-related regulated activities), it must publish a summary of the complaints data it has submitted in the report to the FCA, usually on its website.
DISP 2 covers the ‘jurisdiction’ of the Ombudsman. Those firms whose regulated activities (such as lending, or providing payment services) means their participation in the Ombudsman scheme is compulsory are part of the ‘compulsory’ jurisdiction. Firms undertaking business that isn’t part of the compulsory jurisdiction, but that offer other financial services to customers (such as lending secured by a charge on land) can elect to be part of the scheme; these are part of the ‘voluntary jurisdiction’.
This section also defines an ‘eligible complainant’, which must be a consumer, a micro-enterprise, a charity, trustees, or consumers of buy-to-let activities, who have a relationship with the firm about which they are complaining – for example, they were a customer or potential customer, or a guarantor.
This section also deals with the time-limits; the Ombudsman will only consider cases where the firm has given their final response, or eight weeks have elapsed since the receipt of the complaint. It will not consider complaints referred to it more than six months after the final response or summary resolution communication, or more than six years after the event complained of.
Finally, DISP 3 sets out the complaint handling procedures of the FOS. The Ombudsman will consider cases in whatever manner it sees fit – it can, for example choose to investigate or mediate or hold a hearing. It can require any evidence it thinks is relevant to be provided by either party. The FOS can make a monetary award (for compensation, costs or interest) or make a ‘direction’ which requires the firm to take whatever steps the Ombudsman sets out. Final determination will be sent to both parties, with the complainant required to state whether they accept or reject the determination. If the complainant accepts, the decision is binding on both parties.
DISP is a relatively short section of the Handbook, at only 214 pages, however, it is critical that regulated firms act in compliance with its rules. DISP doesn’t just affect complaint handlers and senior managers, all front-line staff should be trained on how to recognise a complaint.
Our upcoming document is designed to help firms by setting out the key provisions in DISP in ‘plain English’. Keep an eye-out for this on our Resources Section as it could save you countless hours of work!
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