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Regulatory Round Up Of 2021

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Sarah Lawrence

Sarah Lawrence

Sarah has spent over 20 years of experience in the financial services industry, including over 16 years working at the Financial Ombudsman Service. Sarah specialises in customer service and complaints handling, with extensive experience of management and mediating complaints and is dedicated to passing on her knowledge and experience to businesses to improve complaints handling, customer service and consumers’ perceptions of the industry.

In many ways I can’t help feeling that 2021 has been a bit of a replay of 2020, but without the uncertainty and trepidation of the unknown changes the pandemic would bring.

Let’s face it, we’ve had a lot to contend with in the world of complaints, not with just increasing numbers, but also the added complexity of working with increasing levels of vulnerability and continuing to work from home.

As the end of the year draws nigh once more, this is the perfect opportunity to review what we’ve seen in 2021 around the ever-changing world of complaints management as we move into 2022, with all its potential and possibilities.

Starting with a regulatory bang

Let’s start at the beginning. In January we were just starting lockdown 3.0, having experienced a pretty restricted festive period, and both customers and frontline staff were understandably experiencing some pandemic fatigue. It was therefore timely when the FCA published its ‘Guidance for firms on the fair treatment of vulnerable customers’ and it’s ‘Financial Lives Survey 2020’.

I have been genuinely engaged with the publications that have been released from the regulator this year, and these two documents in particular are a must-read. They highlight a huge sea change in the way the FCA was presenting and positioning itself to the market. In other words, the FCA was starting to grow teeth, but also become clearer in its’ expectations and also its intent on what they expect from firms and their commitment to their role in facilitating this.

Impact on customer behaviour

Addressing customer vulnerability throughout 2021 has been challenging for many, as consumers were not just assessing their financial resilience, but also focussing on their mental health and life events as the pandemic continued to take its toll. The FCA’s own figures estimated that a staggering 24 million people had at least one characteristic of vulnerability. That’s over double the number before the Covid-19 pandemic began.

This means not only were we seeing more visible emotion from customers who were desperate, we were also seeing lots of people that had not experienced this before. Lots of those people never expected to be in this position and as a consequence new behaviours were being seen by frontline staff. Combine this with them not having their usual networks of support in place and we have a growing challenge that perhaps hasn’t been acknowledged as much as it should be.

Putting my counsellor head on for a moment, it meant that I’ve seen, first-hand, a lot of frontline staff struggling with degrees of burnout. I’ve seen it with compassion fatigue, struggling to get motivated for their work and even voting with their feet and leaving the industry.

It’s ever-growing challenge for businesses, customers, and frontline staff, who are struggling with their fluctuating levels of confidence and empathy, when they are consistently being asked to offer more and more of themselves.

Financial Ombudsman Service Data

Little wonder then that complaint levels were up at the Financial Ombudsman Service (FOS). This is according to its half yearly data published in September and its latest publication of the quarterly data in November.

I doubt anyone would be surprised to have seen that complaints trends early in 2021 were predominantly about services directly impacted by the pandemic, such as travel insurance, which fell a massive 84% as the world started to open up again. But scams and fraud remain high throughout the year, showing the scale of the problem as scammers and fraudsters increased their activity and targeting vulnerable people throughout 2021.

Perhaps, two of the most dominant talking points though come from wedding insurance with uphold rates of 77%, also the levels of complaints (and upholds) around lending services have increased. Perhaps no great surprise given the backdrop of vulnerability, but when we start to glance ahead to 2022, it is clear that there is a lot of work coming our way in terms of the New Consumer Duty guidance.

FCA and Consumer Duty

No review of 2021 would be complete without at least a reference to the document ‘A New Consumer Duty’ guidance. The first consultation landed in May, and whilst it has now closed, the second is coming on 31 December, with guidance being finalised in July next year. If you’ve not read this, I would urge you to, as it provides a lot of meat to the bones around the FCA’s direction of travel when it comes to culture.

Now, I’ve heard lots of businesses questioning the need for this new guidance, after all we have the Principles for Business don’t we? Surely that’s sufficient? No, they’re not and that has become blatantly clear with the amount of lending services complaints the FOS is seeing and upholding. We’re still on the merry-go-round of unsuitable products being marketed and sold to vulnerable customers. Little wonder then that we see the exasperation from the FCA when it says:

‘In essence we want to see firms putting themselves in their customers’ shoes, asking themselves ‘would I be happy to be treated in the way my firm treats its customers?’

And there we have it, the empathy that should be sitting at the very core of all business decisions when it comes to customers.

What it all means

2021 has been quite the year, and while sit and anticipate all the changes that are coming our way next year, it pays to reflect and see where we’ve come from.
It almost feels that what we’ve been through this year is something of a warmup 2022, as the FCA has been carefully positioning and preparing us for some big changes. But we’ve learned plenty and I’ve seen some really positive changes businesses are making. That’s why my next blog will focus on vulnerability, because that will remain a huge topic for 2022.

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