Chris Cummings takes a look at the FSA’s flagship initiative, Treating Customers Fairly, and considers how intermediaries should address it
Did you hear about the sausage manufacturer who fell upon hard times? He couldn’t make both ends meat. Terrible joke I know, but one of my favourites.
The reason for starting this article with it reflects a serious point: when things go wrong or firms start cutting corners and consumers miss out, we all expect regulatory action.
Fewer people support the idea of a regulator that announces a policy of changing cultures in businesses that are not recognised as having unhappy customers.
By now there will be few people in the industry who have not heard of Treating Customers Fairly (TCF). In the alphabet soup of regulation, this is the latest set of acronyms to get to know. TCF comes from a stated FSA principle.
Few of us would have any problems with this as a concept – or indeed in practice. Let’s be honest, while you are more likely to get divorced than change banks, customers find changing intermediaries quite a simple process and will happily do so if they do not feel appreciated.
AMI has just released a new guide to TCF and this is available free to members on our website (www.a-m-i.org.uk) or you can get hold of a copy by phoning us on 0207 628 1288. Please make the effort – it’s free and feedback already received suggests this is one of the most useful guides we’ve published to date.
Beauty in eye of beholder
The positive thing about TCF is it is about ‘principles-based regulation’. For those unfamiliar with the jargon, this simply means there isn’t a rule to refer to – its beauty is in the eye of the beholder.
We are delighted to see this move as it recognises that firms are run by grown-ups capable of assessing the risks in their business and putting in place appropriate levels of consumer protection.
These can then be explained to a listening regulator who will assess the risk mitigation with reference to that particular circumstance and not by recourse to a hefty rulebook.
Or, to simplify the simplification, firms shouldn’t get into trouble with a jobsworth box-ticker just because you haven’t dotted every ‘i’ and crossed every ‘t’.
Or, to simplify the simplification of the simplification, you should be able to talk to the FSA and agree what’s best for you, the regulator and, most importantly, the customer.
The worry with principles-based regulation is there isn’t a rule to refer to – and the FSA really won’t tell you what’s OK – as it’s up to you to decide for yourself and get on with it. It’ll be back to you at a later date.
Of course that means the ‘safe harbour’ of simply following a rule also disappears. So, you pays-your-money-and-you-takes-your-choice. Lots of rules or a principles-based approach with more freedom but potential risk?
Action plans
So, what does the FSA expect you to be doing now? The AMI guide sets this out in some detail. There is an expectation that firms have appointed someone at board level, in the senior management group or on the partnership team whose responsibility it is to ensure the full delivery of TCF.
The FSA has clearly flagged this is not an issue to be buried in the ‘compliance ghetto’. It is about strategic and operational management of the business – so must be cascaded throughout the organisation.
Similarly, firms should also have completed a gap analysis setting out what TCF means for their business and what changes they need to make. To give you an example: when choosing a lender panel, a key selection criterion will have been TCF.
I wonder how many firms asked lenders to provide copies of their TCF procedures to ensure the lender’s TCF approach matched theirs – and if it didn’t, what action was being taken?
If this sounds like overkill, you’re gifted and have been reading my mind (please stop and continue with this article instead).
In their action plans, firms should address the areas of management information, remuneration, comp-laints handling, advice process and so on.
Prove it
So, how should you find more information (apart from reading the AMI guide)? The FSA has a dedicated micro-site which details much of its work to date. We can also expect another publication from it at the end of June – with a conference to be held in September.
TCF is a laudable programme – who would ever argue that any other idea is right? I just worry about trying to prove that customers have been treated fairly. Firms can and must keep records of their decisions, recommendations and actions.
The regulator can inspect these – and the Ombudsman can call upon them in the case of a complaint. But do they prove a customer has been treated fairly?
They can show that all regulations were adhered to (that were applicable at the time) and I suppose they can indicate a firm was endeavouring to be customer-focused. But fairness is a tricky one.
I usually hear people saying they weren’t treated fairly when what they actually mean is they didn’t get their own way. Rather like the ‘war on terror’, more than anyone first thought this could be biting off something more than can be chewed.
Chris Cummings is director of The Association of Mortgage Intermediaries (AMI)
