Understandably TCF received a lot of attention in the run-up to the two FSA imposed industry deadlines in 2008. This required financial services firms to have robust measures in place to allow an assessment of whether TCF was working, and for TCF to be embedded in the culture of firms. Since then the FSA has taken forward the assessment of fair customer treatment through its ARROW risk assessment methodology. So, what are firms doing about it now, in 2010, and what are the regulators expectations?
Some firms and commentators have suggested that TCF is effectively dead, the FSA failed to drive through any lasting change and it is no longer a priority of the regulator. This suggestion is somewhat naive and misses the point that how you treat your customers was not simply a project to focus on in 2007/2008 but is the right way to do business going forward.
The driving force behind the FSA’s focus on TCF was that for too long the industry had failed to put things right without regulatory intervention (think pensions review, endowment mis-selling, payment protection insurance). Also, TCF was meant to give more freedom to firms to set out their own stall, rather than impose an approach on the industry because of its principles based nature.
Has anything really changed in the mindset and culture of firms because of TCF? The challenge stems from the fact that firms have been waiting for the regulator to give them direction, to set the bar by which firms can pass the test, or tick the box. This has led to many approaches, but in the main to a lack of real change around the fair treatment of customers.
Management information generated to evidence the delivery of TCF continues to be either bland or over-complicated and is little used by senior management teams to drive commercial decisions. The inherent behaviour of firms continues to be driven towards securing revenue today rather than thinking longer term about developing and building mutually valuable relationships.
The regulatory landscape has altered significantly since the 2008 deadlines with the fallout from the recession. A move towards more prescription, the “credible deterrence” enforcement approach and a generally more challenging regulator is leading to more intrusive regulation and a greater push to make judgements on the decisions made by senior management teams. This overall approach is leading to increased use of section 166 reports and enforcement action by the FSA.
The establishment of a ‘Core Conduct Programme’ and the desire to challenge firms earlier in the product lifecycle, i.e. at the product design stage, is a move towards greater regulation of products, rather than just how they have been sold. This is also echoed by some of the proposals within the Mortgage Market Review.
In parallel the FSA has found a number of issues with how large retail banks receive, record and handle their complaints. Changes to the Dispute Resolution rules will likely happen as a result, particularly on areas such as abolishing the ability for firms to operate a two stage complaint handling process where it has become evident that customers who are more persistent get a better outcome than the more accepting or less aware customers.
So, what should firms do to align themselves to this more proactive stance by the regulator?
The simple answer to this question is to get more on the front foot in the way that firms deal with customers, in all interactions. As the Core Conduct Programme roles out, firms will be challenged on the way they are treating, and have historically treated, their customers. Taking a proactive approach today will enable an understanding to be reached on the areas of likely challenge. The key questions that need to be answered are:
- Are we set up to deliver for our customers?
- What have we sold in the past that might cause us issues in the future?
- Do we really put things right when they have gone wrong?
- Do we make decisions at a senior enough level to drive through real change and real customer benefit?
The public perception of the banking industry is that it is set up to serve itself. Changing this belief will not happen overnight and is not easy. However, a firm that is willing to take that leap of faith and change its culture from just seeking to generate revenue to building lasting relationship with its customers, while understanding the commercial benefit of customer advocacy and retaining and nurturing its customer base, will put itself at a competitive advantage.
To return to the question in the title of this article, TCF is definitely alive and kicking. By that we mean it is alive in the regulator’s mind and the minds of customers who want to be treated fairly. It is the role of senior management to ensure that TCF, or how an organisation treats their customers, is a key strategic component of the decision making process and is not something that is passed over quickly or simply done to please the regulator.
About Huntswood
Huntswood is a professional services organisation which delivers customer services and consulting based solutions to clients throughout the UK, Europe and North America.
Founded in 1996 by David Brownlow and Philip Eaton, Huntswood provides a range of services to enable businesses to manage regulatory challenges while optimising business performance.
Huntswood offers a range of complementary propositions which focus on customer service delivery, consulting, recruitment and learning and development.
Huntswood’s background and reputation within the financial services sector has led to the natural migration and diversification of services offered. As well as financial services, Huntswood also delivers solutions to the telecommunication, healthcare, travel and utilities sectors, in both the public and private sector, as well as regulators and trade associations.
Dedicated facilities in Reading and North Lanarkshire also enable Huntswood to provide high quality, fully integrated off-site solutions to their customers.
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