What you say about FSCS ….and some reactions to it
FSCS’s first obligation is to provide a responsive and empathetic service to the consumers who make claims for compensation. Like many other service providers, we therefore seek feedback from our customers about their satisfaction with the service they receive.
We also recognise, however, that we have important obligations to other stakeholders.
We have an obligation to our levy payers to operate efficiently and to communicate in a timely and clear way about the levies we raise. The volatility and unpredictability of our workload, allied to a pay-as-you-go funding regime, mean that firms need as much warning as possible if rising compensation costs look likely to trigger a supplementary levy.
We also provide direct support to banks, building societies and credit unions in their preparation of Single Customer View files which would support a seven day pay-out if the need ever arose.
Our partners in the regulators and in government naturally want to be assured that FSCS is ready to deal with a major failure should one occur. Our ability to protect consumers in a crisis is important to maintaining financial stability.
And MPs have an interest in how effectively FSCS is communicating about our protection, the scope of protection, as well as, clearly, about the quality of service we provide to their constituents.
We take these obligations seriously and conduct an annual survey of our stakeholders – levy payers, regulators and MPs – to test how well you think we’re responding. The survey collects both quantitative and qualitative feedback. The qualitative feedback is collected through a programme of interviews undertaken by an independent agency.
So what does the 2017 survey tell us?
Well, there is much that is positive.
Industry stakeholders – mainly the trade bodies – remain predominantly satisfied with FSCS: 87.5% regard FSCS mainly favourably; only 12.5% unfavourably.
You state for the most part that you understand our objectives very well. You give us high marks for sound management, our stakeholder engagement and our contribution to consumer confidence and financial stability.
Your marks for cost effectiveness and pursuing recoveries, though still positive, are, however, lower.
I think this gives us a useful indication of where we need to improve our communication.
I should simply observe on recoveries that it is often difficult to give a running commentary on our work when this involves complex litigation and negotiation with counter-parties. We shall, however, always report fully on the end result as we did, for example, on the Keydata recoveries where, after costs, we returned roughly £100m to the industry.
The qualitative feedback from all stakeholders also identifies strengths, but raises some interesting issues.
You are confident about FSCS’s capabilities. You find our people responsive and willing to listen. You regard our communications as generally strong.
But there were some misgivings that FSCS may occasionally over-step the mark in what we say publicly about policy issues.
On this, I can only explain how I see the proper limits of FSCS’s public comment, including my own.
And on this the first thing to say is that I certainly do not regard FSCS as having a wide remit to comment on financial services issues or to act as a voice for consumers. That would indeed carry us outside the proper scope of our competence.
But I do think that FSCS can contribute analysis and measured commentary on matters which bear on the delivery of a compensation service and our objectives.
We must, of course, recognise that we are not the decision-makers when it comes to setting the rules within which we operate. We must recognise that many other stakeholders will also have views.
We can, though, illuminate important trends in claims and the payment of compensation: the growing cost of compensating consumers for bad advice to hold very esoteric assets within SIPP wrappers, for example. We can comment from our own direct experiences. And I think it is legitimate for FSCS to comment on the clarity of our protection for consumers because clarity plays an important part in underpinning confidence and stability.
Perhaps the wider point, however, is that FSCS must retain the confidence of our stakeholders. This latest survey indicates that we have now.
But it also confirms that, to retain your confidence, we need to demonstrate our cost-effectiveness, continue to give priority to timely and effective communication and ensure that FSCS sticks to our task of delivering a compensation service which supports public confidence in the industry.