In Part Two of a special series of reports regarding conduct risk and consumer protection regulations, we continue with a brief history on the principles of fair treatment.
In 2011, the OECD and the Financial Stability Board published a set of 10 principles on fair treatment, and in doing so took this whole issue onto a truly international scale. In fact, in February, “Consumers International” produced a best practice report into the implementation of these principles. Five of these principles relate to data protection, competition and financial education, but here are the others that are most relevant to treating customers fairly:
• Equitable and Fair Treatment of Consumers
• Disclosure and Transparency
• Responsible Business Conduct of Financial Services Providers and Authorised Agents
• Complaints Handling and Redress
It’s important to underline that “equitable” is not the same as “equal”. Equitable is associated with fairness while equal is associated with treating everyone in the same way, which is not what TCF is about; each customer is unique and expects be treated as such.
So, there is recent important progress at an international level on treating customers fairly, but the basic tenets of TCF were first established and used in the UK, and it’s well worth having a closer look at these:
• Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
• Customers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
• Where customers receive advice, the advice is suitable and takes account of their circumstances.
• Customers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.
• Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.
• Customers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.
There are three crucial points to note when reading these:
Firstly the customer means the end customer, i.e. the person who buys the product, not the adviser.
Secondly, nowhere in these principles do they talk about customer satisfaction. That’s because TCF is not about creating satisfied customers nor about improving customer satisfaction results. Satisfied customers may not always have been treated fairly. Thirdly, you’ll notice that TCF is not just about the quality of advice – it impacts all parts of the product value chain. It seems, however, that many regulators are focussing on this part of the value chain – this could be at the expense of other critical parts of the customer journey.
This last principle is the most important as it talks about embedding TCF into the culture of the organisation. It’s taking years to embed these principles into UK organisations and some would say there is still a long way to go, given recent scandals.
Perhaps the most significant change in the UK is the recent change to a ‘twin peaks’ regulatory system which will allow the new “Financial Conduct Authority” to take a significantly more pro-active approach to the enforcement of TCF principles.
Part three will include a global overview of consumer protection regulations
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Stephen Rosling is Co-Founder and Director of TCF Matters, a new international training and consultancy firm specialising in the audit and implementation of consumer protection regulations. He has worked in the financial services sector for over 25 years.