Hot on the heels of a major review into redress handling, the FCA issued a competition for research into growth opportunities in the Financial Sector. Both initiatives come from the Chancellor’s Mansion House speech in November 2024 setting out the Governments objectives for regulatory change and growth. Previously, the most recent major change was the introduction of the Consumer Duty in 2023 which focussed attention on delivering the best possible customer outcomes and building all products and services around the needs and best interests of the consumer.
Total complaints volumes remain stable.
Since the high volumes due to PPI have been resolved, total complaints have remained steady between 1.8m and 2m per half year, with different products and services compensating for decreasing complaints in some with rising complaints in others. However, even in those areas where complaints volumes are decreasing, there are still areas to work on regarding the effectiveness of resolving the complaints that are received. With the focus on the Consumer Duty on positive customer outcomes, it is quality as much as quantity that matters when it comes to resolving customer complaints.
For example, Banking has not just seen a reduction in volumes but has been a continued good performer across the core metrics, and they remain the best performing sector. That said, the 3 Working Day (3WD) performance has dropped with 46% now being resolved within this timeframe. A further positive sign is that there has been a reduction in the Uphold rate, down to 54% of escalations being found in favour of the customer. Whilst still high, this is a good sign of improvements post-Consumer Duty.
Home Finance is the only other sector to see a small reduction in complaint volumes, down 2% from the previous period. Closure performance has been good as well with stable uphold rates and improving 3WD and 8 Week (8WK) breach performance. Complaints now taking beyond 8 weeks to resolve have dropped by 8% points, down 7%, indicating volumes are much more in control.
Insurance products have experienced erratic complaint volumes over recent periods, and this has continued with a 2% increase (on the back of a 5% reduction previously). Closure rates have also improved, eradicating the previous backlog. The uphold rates have dropped to 57%, signifying improvements in the robustness of complaint investigations. This is the second consecutive reduction, showing a positive direction of travel post-Consumer Duty. However, the sector remains under scrutiny from the regulator, with concerns around fair value and consumer understanding regarding renewal premiums, claim ratios, total loss valuations, gap, and pet insurance.
Challenges for motor and complex products
Unsurprisingly given the FCA review into commissions and recent publicity, the Motor Finance sector has experienced a significant increase in complaints received. Most of these complaints are currently on pause pending the decision of the Supreme Court and the FCA’s own conclusions, currently expected in May 2025. In addition, companies dealing with complaints regarding more complex products are not only experiencing an increase in volumes, but the data also indicates challenges with resolving these within the required timeframe.
Consumer Credit has seen an expected increase in volumes on the back of the Motor Finance Discretionary Commission Arrangements (DCA) issue, taking volumes to just over 1m. 55% of these new complaints have also been carried forward, again indicating they largely relate to the DCA complaints currently on pause. For complaints that have been closed, the uphold rates continue to be the best across all sectors and has reduced further to 34%.
High-Cost Car Finance as a subset of consumer credit has seen a significant increase in volumes both as consequence of the wider DCA issue and also relating to affordable lending. Volumes have increased by c. 65%, and we would anticipate further increases as the commission scope increases beyond DCA pending the Supreme Court’s hearing of the Court of Appeal judgment.
Investment products and services have experienced an increase in total complaint volumes, up 6.5% compared to the last period. Closure performance indicates challenges in managing these volumes, with a small backlog of c. 6k accruing. 3WD, 8WK and Uphold performance remains challenging, all of which indicates that it would be worthwhile for the companies to review both processes and products as per Consumer Duty expectations. FCA questions around fair value and consumer understand for these products continue and examining what the complaints trends can tell them could prove hugely valuable for the businesses affected.
Pensions complaint volumes rose by 7.9% and pressure on other key metrics indicates the ongoing challenges experienced by the sector. The complex nature of pensions products means that 3WD closures are currently at 20% and this, combined with an increase in the carry forward rate, and high uphold rates and 8WK closure numbers reflect these challenges. However, at this point the FCA will be expecting firms to devote the attention and resources to improving these figures as per the Consumer Duty ethos. Reviews of processes, products, communications, and resource volumes can identify changes that can make the most difference to consumers.
What these figures tell us about complaint handling challenges
Given the variety of products and services offered by the financial services sector, there is little surprise that managing them when things go wrong can vary so much. As would be expected, when complaints concern more straightforward products, the resolution performance is higher. For example, the Banking, Insurance, and Home Finance sectors are all performing reasonably well across the core metrics, and each can point to positives in terms of reducing volumes and uphold rates.
That said, some of the other metrics have been slipping which are affecting service standards for customers within the complaint journey. For these firms, a deeper dive into their Root Cause Analysis figures should identify areas for improvement that will further drive down claim numbers, as well as highlight where in the complaint journey the process is slowing.
For those facing FCA investigations and dealing with complex products, there is a greater struggle to improve across the core metrics. Sudden increases in volume are difficult for in-house teams to deal with as part of business-as-usual activity and, to act in the customers best interests in the short term, considering outside support, even on a temporary basis to help with the influx.
This will help to prevent firms from falling fowl of both consumers and the regulator. However, the longer term implications also need to be prepared for, as we have seen with motor finance firms preparing for the results of legal judgments and the FCA investigation in both adjusting their operations and also ensuring they have the funds to accommodate potential redress.
For firms struggling with complaints about their more complex products, a more holistic view is needed about how complaints are resolved. Areas to address include the process that they follow and information that is available, the training and capacity of the complaints handling teams, the availability of product specialists and QA staff to support in complex areas, and the clarity of communications with the consumer. Getting the right balance of automated support to handle the process and offer standard guidance, combined with the right people with the relevant specialist knowledge and flexibility of staff availability can transform the complaints handling function, for both the business and the consumer.
Final Reflections
18 months post the introduction of the Consumer Duty shows that it has yet to have a definitive impact on complaint numbers overall. While firms are never going to eradicate complaints completely, the effectiveness of resolving them in a way which meets both customer and regulator’s expectations remains a work in progress. While the FCA is actively looking to review and adapt how mass claim events are handled by the industry, it is equally important to firms to review how they handle business-as-usual complaints.
EQ Customer Resolutions work with some of the UK’s largest banking firms and can support all regulated businesses to optimising their complaints journey, whether by introducing new, more effective technology and processes, or by providing additional resource with specialist skillsets and customer facing expertise to enhance in house teams.