As financial trade bodies ask the government to water down the Financial Ombudsman Service, I think its creation has been one of the great successes of financial regulation over the past decade.
Financial services companies need to understand that the customer is always right – complaints sent to the Financial Ombudsman Service (FOS) are an opportunity.
The FOS is a free and independent adjudication service that has ruled on more than one million cases; helping consumers get a fair hearing in a market where the odds are often stacked against them.
Only financial companies dislike the FOS
Perhaps the greatest proof of the FOS’s success is that the only people who feel it’s in need of reform are the financial services companies themselves.
So strongly do they feel this, that a few weeks ago, a group of the financial trade bodies clubbed together to write a letter to the Financial Secretary to the Treasury, Mark Hoban, in which they stated their case for a watering down of the Ombudsman’s influence.
The letter accused the FOS of retrospectively implementing financial regulation, and even included a veiled suggestion that consumers might need to start bearing some of the cost of taking a complaint to the Ombudsman, rather than financial companies carrying the bill.
Perhaps most disappointing was the fact that the Building Societies Association and Association of Financial Mutuals were among those who put their names to this letter. These are bodies that represent companies that are owned by their customers; yet all too often they are found aligned with the banks.
Complaints are an opportunity
The letter to Mark Hoban epitomises one of the main problems with financial services companies today. Rather than dealing with complaints properly and fairly, insurers and banks would sooner put their efforts into trying to water down the powers of the consumer’s appeal court.
When faced with a complaint, far too many financial firms still take the view that the aim should be to get rid of it without paying a penny in compensation. This is typically achieved by being slow to respond and testing customers’ patience.
Over the last two years, I’ve attended a number of financial services complaints-handling conferences where delegates stare blankly at a range of speakers who insist that complaints are an opportunity. Most other consumer-facing industries understand this as the most basic rule of business – the customer’s always right.
Yet in the world of financial services, this mantra is unheard of. But the conference speakers are spot on. Financial companies should see every angry call as their chance to send a customer away with a smile on their face, and a newfound loyalty for their firm. Good complaints handling and profitability are not mutually exclusive.
The industry must pay for the FOS
On the issue of who pays, it’s entirely right that the industry continues to pick up the bill for customers who use the FOS. Many people don’t pursue complaints because they run out of steam. Any financial charge for using the Ombudsman would only worsen this.
But financial services companies that understand the meaning of ‘treating customers fairly’ need barely ever find themselves in front of the Ombudsman. According to the latest FOS data, Lloyds TSB saw more than 12,000 new cases opened against it during the last six months of 2010, while NS&I, which also has millions of customers, had just 30.
Which? has written to Mr Hoban calling on him to make sure that the FOS maintains its role as a strong, impartial and free Ombudsman. Do you agree that the FOS should be left well alone?