Posted: 14th November 2024
The FCA takes action post the recent Court of Appeal decisions
The FCA announced yesterday that it will consult on whether complaint handling timelines should be paused for all commission-related complaints. This decision follows recent rulings by the Court of Appeal in the cases of Hopcraft v Close Brothers Ltd, Johnson v Firstrand Bank Ltd, and Wrench v Firstrand Bank Ltd.
These rulings have determined that it is unlawful for firms to receive a commission without the informed consent of the customer, and the judgements cover both fixed and discretionary commissions. The two firms involved in these cases have decided to appeal the judgements and are currently awaiting permission from the Supreme Court to proceed with their appeals.
The FCA acknowledges that, although these judgements are based on common law rather than FCA rules or principles, it is crucial to consider the outcomes of any subsequent appeals. This consideration will be integrated into the broader review of discretionary commissions that the FCA is currently undertaking.
In light of these developments, the FCA intends to consult on extending the timelines that firms have to resolve complaints about all types of commissions. This consultation is prompted by the anticipated increase in complaint volumes following the Court of Appeal’s judgements.
The primary aim of this extension is to provide firms with adequate time to prepare for and manage a high volume of complaints. This preparation is essential to ensure that customers receive fair and consistent outcomes, rather than experiencing inconsistent decisions due to a lack of industry alignment.
Implications for Firms
While it is challenging to predict the exact outcome of the FCA’s consultation at this stage, it is likely that the complaint handling timelines will be extended. This extension is more likely to align with the current extension related to discretionary commissions.
What Should Firms Be Doing in the Interim?
The FCA emphasises the importance of firms preparing for an increased volume of complaints. This preparation involves ensuring that firms have the right blend of personnel and technological solutions in place. These solutions should be capable of efficiently logging complaints, responding to Data Subject Access Requests (DSARs), and determining complaint outcomes when the time comes. An efficient end-to-end process for responding to customers and handling queries is essential, to achieve good customer outcomes whilst tightly managing operational costs.
Firms can also adopt more proactive measures to manage the anticipated influx of new complaints. For instance, by providing more information on your website about developments, you may encourage customers to interact with your firm directly, minimising exposure to third parties acting on customers’ behalf. By providing up-to-date information, you can also minimise customers contacting you with queries.
In addition to these measures, firms should consider reviewing and updating their internal communications to all front-line teams to ensure that staff are well-equipped to handle the expected increase in complaints.
Furthermore, firms should engage with their customers proactively whilst their complaints are paused to manage expectations and provide clear information about the complaints process, as and when it becomes available. This communication can help to build trust and ensure that customers feel supported throughout the process.
In reality, many of these steps are similar to those that firms should already be taking to prepare for Discretionary Commission Arrangement (DCA) remediation. By taking these proactive measures, firms can better manage the anticipated increase in complaints and ensure that they are well-prepared to deliver fair and consistent outcomes for their customers.
