The FCA’s H2 2023 complaints data reveals several positive improvements in complaints handling by financial services firms. But the devil is in the detail with performance suffering in complex areas, and evidence that companies may not quite have the right systems and processes to make the most of their data and put it to use improving their products and services.
EQ’s Customer Resolutions complaints data experts have completed a deep dive analysis of complaints trends and themes to reveal the key areas for financial services firms to work on to improve performance in line with Consumer Duty.
Complaints Trends in each Financial Services Sector
Banking – Complaint volumes continue their slight but steady increase in this sector, which has also seen a reduction in 3WD (working day) closure rates. Other core metrics are relatively healthy compared to other sectors but these numbers are still higher than the FCA may want to see from such an established area. Similarly, uphold rates remain stable but relatively high at 58%, and the FCA may note that there have been no noticeable improvements since the introduction of Consumer Duty.
Home Finance – Complaints volumes have seen an increase of c5% from the previous period, the second highest across all sectors. Small improvements have been made across the other core metrics, so there is a positive direction of travel. Although, whilst the Uphold and 8WK (week) Breach performance has improved slightly, they are still high and could attract regulatory scrutiny.
Insurance – Complaints volumes continue their erratic pattern in this sector, this time with a 5% reduction, high compared to the overall reduction of c1% across all sectors. As with Home Finance, the insurance sector has seen small improvements in some metrics. Their 3WD closures have increased again (a continuing trend), making them the second best across all sectors. Uphold rates have also dropped but are still higher than the overall FS average and potentially an area of risk for the sector. Increasing carry forward rates and a high 8WK Breach rate also indicate firms may be struggling with overall volumes which is impacting their speed to closure.
Consumer Credit - Volumes have remained largely static for this period, albeit with a further increase in their overall carry-forward rate. Uphold continues to be the best in class, dropping further to 36% for the period. Notable sub-sectors for consumer credit are performing as follows:
- Debt Collection Agencies – Unsurprisingly given the cost-of-living crisis, there has been a noticeable increase in this sub-sector. An increase in volumes of c22% could demonstrate cost of living impacts are now being felt for longer and further down the credit supply chain.
- HCSTL – Volumes have reduced significantly with only 1 lender now featuring in the higher reporting threshold. Interestingly, this trend continues to indicate there’s no correlation between the cost-of-living crisis and HCSTL lending complaints.
- Revolving Credit firms (catalogue shopping) – Similarly, there has been a further drop in volumes of c4.5% within this cohort. This has been a continuing trend since H2 2020 with a drop of c65% over this period. Again, this continues to indicate the cost-of-living impacts are not being seen here, and impacts from irresponsible lending complaints peak appear to have passed.
- High-Cost Car Finance – Volumes appear to have plateaued in this sub-sector since the peak in the previous period, with a decrease of c9%. However, volumes remain high following previous significant increases (Subject to a current review by the FCA over commission disclosures), and this sector is actively engaged with the regulator to manage this influx.
Investment – The sector that has seen the largest increase in volumes of c11%. Overall closure performance has remained stable, but is still very low, with risks across the board - 3WD rates (25%), 8WK Breaches (13%) and Uphold rates (60%). As an area with many complex products and bearing the brunt of challenging market conditions, this is somewhat expected. However, with the Consumer Duty now fully in force, firms should act to review their processes, systems and capacity to improve these figures in the future.
Pensions – Another area with more complex products resulting in longer resolution times for more complicated complaints. Performance rates remained stable but concerning for the pensions sector. There was a very small reduction in overall volumes, but closure performance remains challenging with a 3WD performance of 19%, the breach rate at c20% and a slight increase in Uphold rates to 66%. As with Investments, firms may attract more regulatory attention if this is considered business as usual rather than a starting point for active improvements to processes and operations.
Complaints Trends Summary for H2 2023
The latest data reveals progress, with small improvements in complaint performance, including positive steps in 3WD closures and small reductions in Uphold rates. This may be evidence of the positive impact of the Consumer Duty implementation activity to embed the new regulations by July 2023.
The data also reveals areas to work on, as despite the slight reduction, the total percentage of uphold rates remains high. This again indicates that improvements made through the Consumer Duty have either not been far-reaching enough or are taking time to track through to improved outcomes through the complaint journey.
Sectors with complex products also continue to struggle across all the main areas, and there is concern this continued performance demonstrates the difficulties faced in embedding the new regulations, and that there is still more to be done to improve customer outcomes.
For many businesses, the solutions to these challenges lie within their own data, which, if gathered and analysed correctly, will reveal the main areas for business improvements. For others, where volumes remain stubbornly high, ongoing closure performance is a struggle, or regulatory attention is increasing, it may be time for a wider review of the people, processes and technology that make up their complaint-handling operations.