In addition to its detailed rulebook, the FSA specifies several high-level principles, including: “A firm must pay due regard to the interests of its customers and treat them fairly”.
TCF applies to banks, financial advisers and product providers, and firms are expected to monitor their procedures on a regular basis to ensure they continue to treat customers fairly. Firms are also expected to keep evidence that they are meeting their TCF obligations.
The FSA has specified six TCF outcomes:
1: Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture
- Firms should have measures in place for monitoring levels of customer satisfaction, and should keep records of measures taken to try and improve customer satisfaction.
- Risks and product features should be clearly explained to customers, using everyday language and not financial jargon.
- Customers can be surveyed to ascertain levels of satisfaction with the service.
2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
- Products should be designed so that their terms and conditions are favourable to customers.
- Advisers should take care to ensure a product is suitable for a customer before it is recommended.
3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
- Firms should communicate with the customer via documentation that is free from jargon. The post-sale letter should clearly explain what has been recommended, why it meets the needs of the customer, what the main product features are and what the principal risks are.
- Customers should be kept reguarly informed of the performance of investment products.
4 : Where consumers receive advice, the advice is suitable and takes account of their circumstances.
- Firms should ensure advisers are appropriately qualified and that they undertake regular training.
- Firms should undertake comprehensive monitoring of the advice given by their advisers to ensure recommendations are suitable.
- Firms should ensure that the confidential customer information they gather in order to make a recommendation is correct, complete and up-to-date.
5: Consumers are provided with products that perform as firms have led them to expect and the associated service is of an acceptable standard and as they have been led to expect.
- Firms should fully research new products and seek customer feedback.
- Customers should be kept regularly updated on product performance
6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint
- Firms should have target timescales for dealing with requests to switch product or make a claim.
- Guidance should be offered to customers making complex claims.
- Arrangements should be in place to ensure that staff absences do not affect customer service levels.
- Complaints should be accepted in the form they are received, i.e. customers complaining by telephone should not be asked to put the matter in writing before it can be considered.
- Complaints should be investigated as fully and fairly as possible, with the customer kept fully informed during this process. Firms should make a fair assessment of the evidence and offer appropriate redress when they are at fault.
Activities such as consumer credit and deposit banking, while not regulated by the FSA, fall under the jurisdiction of the Financial Ombudsman Service (FOS). The FOS is an independent body that customers can ask to adjudicate on complaints made to financial services firms should they disagree with the firm’s assessment.
The FOS usually makes decisions not on whether the firm has followed the rules, but on whether it believes the firm has treated the customer fairly. So the entire financial sector, including firms not regulated by the FSA, must have TCF embedded into their practices.
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