Treating Customers Fairly isn’t just a PR catchphrase anymore, it now has teeth
As customers we want fair treatment from everyone we do business with, especially those that manage our money. The Financial Services Board (FSB) has been tasked to ensure businesses in the financial services sector do just that. Under the Treating Customers Fairly TCF outcomes based regulatory (and supervisory) approach any financial service organisation who is found wanting can find themselves subject to some eye-watering financial penalties.
Ok, so how does the TCF approach actually benefit you? Is TCF just a wonderful ideal, or can it actually help us when dealing with the banks and other financial organisations? Understanding these principles will help you have more confidence in your fair (or unfair) treatment with any organisation you are dealing with.
The 6 Treating Customers Fairly TCF consumer principles explained in plain english:
1. Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture. (Culture and Governance)
What this actually means: It means the FSB doesn’t want organisations to do the right thing because they have been told they have to, but because it part of their nature (culture). As culture is what we do and reward each day, it is about reinforcing this way of doing business. Organisations need to demonstrate through their behaviour that they have the integrity to do the right thing, because it is the right thing.
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. (Product suitability)
What this actually means: Essentially the FSB is saying that it’s unfair to sell a product to a customer who has no need of it, or if it is beyond their ability to afford. For example selling a 40 year mortgage to a client who is 4 years away from retirement; selling loans and credit cards to someone who doesn’t have a job. Products must be designed for a specific target group’s need, and not just to make money. Institutions lending money must ensure that you can actually afford the repayments before they loan any money. Affordability and suitability are a key elements here.
3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale. (Disclosure)
What this actually means: This is largely about clear and transparent communication – the ‘devil is in the detail’ – eliminating small print that obscures the real cost. Organisations can no longer hide important information in the small print any more. When an organisation tries to sell you a financial service or product, you must be made aware of the key points. Including but not limited to:
- the total cost of the loan
- any potential penalties and charges
- the terms of the agreement,
- any security required (such as your home)
In real terms the advisor need to disclose anything they will cost you more money (now or over time), before you sign on the dotted line.
4. Where consumers receive advice, the advice is suitable and takes account of their circumstances. (Suitable advice)
What this actually means: The quality of the advice given matters. This includes on loans, medical aids, insurance, investments, pension funds, etc. The advice on these important issues must be the best possible advice relevant to your specific circumstances. They cannot give advice that is to their best interests (i.e. best commission or sales targets – see RDR). Advisors must ask questions and become familiar with your specific needs. This simple elements of the TCF principles covers a whole world of potential damage if not adhered to by organisations.
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. (Meet expectations)
What this actually means: When we buy financial products and services they must ‘do what it says on the label’. If you bought a car, but found it was missing an engine you’d complain. Unfortunately with Financial services is not always as easy to see the issues. However, if we are told that a savings account will deliver a specific amount of interest in a given period, it needs to do just that. This principle covers all the different types of financial products, from loans to insurance. Expectations must be clearly communicated and then achieved.
6. Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint. (Claims, complaints and changes)
What this actually means: Essentially, it must be simple to switch providers, programmes, make a claim, or even complain when necessary. A slow or overly complicated response to these things from financial institutions isn’t fair to the consumer. The FSB expects organisations to demonstrate that they respond and deliver in a reasonable time frame. The ‘Put it in writing’ approach is no longer an acceptable response when we want to complain or make our concerns known. e.g. Four months finalise a simple household insurance claim, or to move bank accounts is not a reasonable amount of time. Complaints and claims must be dealt with timeously in a way that fairly meets the needs of the claimant.
Many organisations understand that by treating customers fairly they build their brand and customer loyalty. However, when organisations only play lip service to service principles the FSB is there to help enforce the TCF principles.
Are you able to demonstrate your Treating Customers Fairly TCF compliance?
TCF Consulting can help
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