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Ever wondered what your bank's track record is like for dealing with customer complaints? Find out here.

Literally thousands of complaints pour into banks and financial services companies every single day. Clearly, the situation has spun out of control since the industry watchdog the Financial Services Authority (FSA) is taking big steps to improve the way firms deal with unhappy customers.

Latest complaints data

At the same time, the FSA has also released complaints data for the first half of the year reported to them from 820 banks, building societies, insurers and other financial services firms. Believe me, it makes very interesting (and shocking) reading.

To quickly summarise this huge volume of data, the table below shows the complaints track record for some of the largest UK banks over the last six months. (The full data can be found in current firm-level complaints data.)

Bear in mind these figures relate to banking complaints only. Each bank has yet more complaints in the following areas which haven’t been included: home finance (what you and I would call mortgages), general insurance & pure protection, life & pensions and investments.

Big banks complaints handling track record (first half of 2010 - banking complaints only)

Source: Financial Services Authority

As you can easily see, Santander has dealt with the most complaints - not only of the eight banks shown, but of all 820 financial services companies which have disclosed data to the FSA. The bank opened 216,158 new complaints in the first six months of the year, and closed the largest number of complaints over the period at 469,435, which is considerably more than any other firm.

Santander is not the only bank to post worrying results. Barclays is not far behind with 195,956 complaints opened in the first half of 2010, and a whopping 363,358 complaints closed.

Of course, we would expect to see the UK’s biggest banks right at the top of the complaints table. After all, it stands to reason the largest banks would have to deal with many more complaints from a far greater customer base compared with some of the smaller building societies and insurance companies.

Too slow!

That said, it’s very disappointing to see Santander struggles to close less than half (46%) of all banking complaints within the recommended eight-week period. All the other banks perform far better on this particular measure, with Bank of Scotland and Nationwide dealing with 99% of cases within this timescale. Could this suggest Santander is overwhelmed by the sheer volume of complaints it receives, or that it simply fails to give them priority?

It’s also a real concern to see the low level of complaints which are actually upheld by the banks themselves. Bank of Scotland, for example, accepted just 7% of its banking complaints over the last six months. Are we really to believe 93% of its customers complained without good reason?

But what is crystal clear from these figures is that far too many customers have cause to complain. In fact, well over one million complaints have been lodged in aggregate over the first half of the year. This is clearly unacceptable, although I can’t say I’m surprised. Banks have been able to get away with substandard customer service for far too long.

Four key measures

Complaints are often dealt with too slowly and are regularly rejected with apparent ease. Something has to be done which is where the FSA’s latest complaints consultation comes in. The watchdog proposes four key measures to improve complaints handling procedures within the industry. This includes:

• The abolition of the current ‘two-stage' complaints handling rule. Currently, companies canforce you to undergo a second complaints 'appeal' internally if you're dissatisfied with the way your complaintis handled the first time, before allowingyou to go to the Ombudsman. Thissecond stage will be allowed to continue, but you will not be forced to go through it and instead will be able to go to the Ombudsman at this point, toencourage firms to resolve complaints fairly the first time;
• A requirement on firms to appoint a senior individual responsible for complaints handling;
• A requirement to undertake root cause analysis to remedy recurrent or systemic problems with complaints; and
• Highlighting the requirement to take account of decisions made by the Financial Ombudsman Service (FOS) when resolving complaints. (The FOS is an independent service for settling disputes between customers and financial services firms.)

The new rules are scheduled to take force on 1 August 2011, while abolishing the two-stage complaints process will take place by 1 July 2012. These timescales will give firms time to upgrade their procedures to comply with the new rules.

New compensation limits

Additionally, the FSA also proposes to increase the maximum amount of compensation customers can be awarded by the FOS in connection with complaints against financial services firms. A customer has the right to take their complaint to the FOS if they’re unhappy with the way the firm has attempted to resolve matters itself.

Right now, the upper limit is £100,000, but this will be increased to £150,000 on or after 1 January 2012. The current limit has remained unchanged since the FOS was established five years ago. The uplift will combat its declining value in real terms over this period to ensure customers aren’t losing protection.

Will the new rules work?

There’s no question the current framework for dealing with complaints need a thorough overhaul. The new rules and compensation limits certainly won’t make matters worse, but will they really get to the root of the problem? Surely, the FSA's emphasis would be better placed on improving bank customer service itself, meaning fewer customers will feel the need to complain in the first place.

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