Key Trends In The FCA’s Complaints Data Reveal The Work To Be Done By Firms Under The Consumer Duty

Although there was an overall increase in complaints of 5% compared to the previous six months, the performance of companies in dealing with complaints is where the focus will be under the new Consumer Duty. The spotlight falls on the 3-working-day (3WD) and 8-week (8WK) closure rates for dealing with complaints, as well as the uphold rate, where the complaint is resolved in favour of the customer.

Results vary across the financial services industry, yet at each point in the complaints process, there are lessons that the FCA will be keen for firms to learn. A deeper understanding of this data also identifies improvements to implement to ensure that the consumer is put at the heart of all decision-making as the Consumer Duty requires.

Here, we set out the FCA’s core findings and the trends revealed by our own specialist analytics team.

Complaints Volumes

Looking at new/opened complaints, the sector saw an average increase of 5% (up to 1.88m from 1.8m in the previous half). Products seeing an above-average increase were pensions (20%), investments (18%), and insurance and pure protection (6%) while banking and credit cards saw a below-average increase of 3%. The only product group to see a significant decrease in new/opened complaints was home finance (10%).

Consumer Credit saw its first increase in volumes since H1 2020 with an average increase of 6.4%. There were varying results from the subsectors within this product set with reductions in complaint numbers seen in debt collection agencies (25%), High-cost, short-term lending (31%), and revolving credit/catalogue shopping (14%). However, these reductions were offset by a significant increase in new complaints in the car finance sector which saw a jump of 72%.

Closure Rates – within 3 working days or exceeding 8 weeks.

The number and quality of complaint closures will be a key factor in evidencing how the Consumer Duty is being applied in financial services firms. The two metrics the stats measure is whether complaints were closed within 3 working days or if they have exceeded 8 weeks without being closed or a final decision being sent to the customer.

While banking reports the largest volume of complaints due to the volume of customers, this area continues to see best-in-class closure performance with 3WD closures at 58% and 8W breaches at 5.6%.  

At first glance, the insurance sector seems to be keeping up with its 10% increase in volumes by closing more complaints than received and making a dent in its current backlog. 3WD closure performance has also improved to 44% from 43%. However, there has been a slight increase in 8WK breaches, up to 9% from 7%, indicating that the increased volumes are causing additional pressure within some firms.

For pensions and investments, there are also struggles. The investments sector has seen complaints increase (by 22%), a reduction of complaints being closed within 3 working days (down to 25% from 30% in the previous period) and the number of 8WK breaches increase (from 12.9% to 14.4%). In pensions, there has been an increase in volumes (23%) for the third successive period. Similarly, the closure performance continues to worsen with 3WD closures down to 23% and 8WK breaches increasing to 22%.

Both these areas suffer from the complexity of the product involved which can make complaints resolution more challenging. These are ongoing trends that are now presenting real risks and further regulatory pressure is only likely to increase with the Consumer Duty introduction.

Despite Home Finance being the only sector to see a reduction in complaints (10%), closure performance is mixed, with the 3WD performance improving (up to 32% from 30% previously) but 8WK breaches also increasing (up to 15% from 11% previously) and presenting a risk to businesses.

NB – 3WD and 8WK closure rates are not measured for the consumer credit sector.

The Importance of Uphold Rates

Uphold rates represent the percentage of complaints found in favour of the consumer. A high uphold rate indicates that either the product or service that the business provides has failed to meet the consumer’s needs or expectations, which is a key point under the Consumer Duty. Identifying trends within uphold rates themselves to identify products or communications that may be causing confusion and complaints, can play a key role in proving to the FCA that businesses are acting on their CD responsibilities.

For most products, uphold rates have remained consistent in recent reporting periods, however with the introduction of the Consumer Duty, this will likely be under closer scrutiny in the future. Banking (58% uphold), consumer credit (40%), and home finance (59%) all remained stable while others showed varying increases. Insurance has increased from 57% to 63%, while investments went up to 59% from 57%, and pensions saw a small increase to 65% from 64%.

Overall, the uphold performance indicates firms are running with continuing issues with processes and/or systems without addressing the root cause. Persistently high uphold rates against a significant volume of complaints presents a real risk not just to the reputation of the business with consumers, but also financially and from a regulatory standpoint as it can indicate that the business or sector is not learning from previous errors.

Using complaint data under the Consumer Duty

The regulator has been open about the importance of complaint data, and how this will help inform compliance with the new Consumer Duty regulations. Current performance casts doubt on the sector’s ability to meet the Customer Support outcome (helpful and accessible customer support, so it's as easy to sort out a problem, switch or cancel your product, as it was to buy it in the first place), or the Product and Service outcome (ensure that the design of the product or service meets the customer’s needs).

However, the information to identify and start resolving these issues will already exist within the business's own complaints data and better use of root cause analysis would help identify recurring problems and allow firms to implement corrective/preventative measures. Whether this is with an internal project team or external specialists are brought in, the FCA will want to see extra effort to maximise this information and turn it into action that improves products and services for consumers.