I came across this on the FSA website....

Financial Services Authority
Treating Customers Fairly initiative: progress report
May 2007


Key messages

Financial Services Authority 1
• Our latest FSA assessment of progress with the Treating Customers Fairly (TCF)
initiative shows that an encouraging number of firms successfully met the
March 2007 deadline, by which time they had to be implementing necessary
change in a substantial part of their business.
• We believe this shows that senior management in these firms remain committed
to making progress with TCF and are successfully rising to the challenge
presented by this important example of a principles-based approach.
• However, given that TCF has been a priority for some time, we are disappointed
that a sizeable number of firms failed to meet our March deadline.
• We can place limited reliance on senior management in these firms, and will
intensify our supervisory focus accordingly (including through use of
enforcement where warranted).
• TCF will continue to be a major focus in our work with small firms and we
provide a range of tools to help small firms tackle this important issue.
• All firms need to continue to focus on TCF. The March deadline has created
helpful momentum so we are setting further deadlines in 2008. And we will be
increasing the amount of our own FSA resources devoted to supporting and
testing firms in meeting these deadlines.
• In future, where firms can demonstrate their own performance (and it is good),
there will be less scrutiny and therefore a regulatory dividend.
Treating Customers Fairly
initiative: progress report
2 Treating Customers Fairly initiative: progress report
1 Principle 6 states: ‘a firm must pay due regard to the interests of its customers and treat them fairly’. Other Principles are
also relevant when taking a rounded view of what fair treatment might mean, including Principles 1, 2, 3, 7, 8 and 9.
Background
1. The Treating Customers Fairly initiative (TCF) is an important example of the
principles-based approach to regulation in practice. As with the FSA’s principlesbased
approach generally, our focus is on placing responsibility on firms’ senior
management to deliver fair outcomes for consumers and offering firms the flexibility
to deliver these outcomes in the way which best suits their business.
2. Many firms have already invested substantially in changing the way they conduct their
business to ensure that they are meeting the requirements in FSA Principle 6.1 We have
worked with the industry on TCF since 2004, and have encouraged firms to use a
Firms should be focused on delivering the six TCF consumer outcomes:
i. Consumers can be confident that they are dealing with firms where the fair
treatment of customers is central to the corporate culture
ii. Products and services marketed and sold in the retail market are designed to meet
the needs of identified consumer groups and are targeted accordingly
iii. Consumers are provided with clear information and are kept appropriately informed
before, during and after the point of sale
iv. Where consumers receive advice, the advice is suitable and takes account of their
circumstances
v. Consumers 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
vi. Consumers do not face unreasonable post-sale barriers imposed by firms to change
product, switch provider, submit a claim or make a complaint
Financial Services Authority 3
2 We defined implementing as allocating resources and responsibility; developing on plans and processes; and creating
capability. For full details of the stages of TCF see our paper ‘Treating customers fairly – towards fair outcomes for
consumers’, July 2006, p19.
3 Firms regulated by our Major Retail Groups division
4 40 assessments completed, some were based on groups, others on business units within groups.
5 Firms regulated by our Retail Firms division
6 Firms regulated by our Small Firms division
structured approach to reviewing their business and introducing change – through
four phases – ‘aware’, ‘strategy and planning’, ‘implementing’ and ‘embedding’2.
3. In July 2006 we set a deadline for all firms to be at least implementing TCF in a
substantial part of their business by the end of March 2007. The aim was to stimulate
action in firms that were slow to appreciate the significance of TCF and to maintain
momentum in those firms that were moving ahead with their TCF initiatives. This
note sets out the results of our work to measure firms’ progress against this deadline.
Measuring progress with ‘implementing’ TCF
4. We have assessed performance against the deadline by looking at the progress firms
have made with their TCF initiatives rather than whether they are delivering fair
outcomes in all cases for their customers. In some cases, a firm may have failed to
meet the deadline, but this does not automatically mean that the firm is not treating
its customers fairly. Equally, a firm that has met the deadline may still have a
substantial programme of work to complete.
5. We now expect firms that have missed the deadline to engage and make rapid
progress with their work on TCF.
6. For the vast majority of firms, we believe further progress is needed to reach the
embedding phase and ensure the consistent delivery of fair consumer outcomes. This
is, and will continue to be, a significant challenge for most firms, and requires
sustained focus from senior management.
Progress against the March deadline
7. The following number of firms have successfully met the March 2007 deadline:
• 37 major retail groups (93%)3,4;
• 379 (of a sample of 436) medium-sized firms (87%)5;
• 49 (of a sample of 66) wholesale firms where TCF is materially relevant (74%); and
• 273 (of a sample of 659) directly authorised small firms (41%)6.
8. The March deadline has helped to focus firms’ efforts on TCF and generated
momentum within the industry as a whole. These results also show that many firms –
particularly larger and medium-sized firms – have made good progress with their
TCF work. Senior management in these firms remain committed to making progress
with TCF and to making the principles-based approach work.
4 Treating Customers Fairly initiative: progress report
7 See ‘Treating customers fairly – towards fair outcomes for consumers’, July 2006, p 21-22. This included the results
of a self-assessment survey by firms which reported that 80% of major retail groups and 51% of a sample of mediumsized
firms believed that they were at least implementing TCF.
8 Generally the sector categories we have considered are those we use in our risk assessment framework. We have also,
however, looked to see whether the percentage missing the deadline differs between small directly authorised firms
and networks (whose members are small firms). For financial advice networks (some of which also conduct mortgageicon
and general insurance business) the percentage that met the deadline is 63% which we do not consider to be
significantly different from the 52% for small directly authorised financial advisers.
9 Directly authorised firms regulated by our Small Firms division.
9. The results also show improvements – particularly among medium-sized firms –
since we reported firms’ own assessment of progress in July 2006.7 And we know
from our assessment of progress that a small number of firms have now progressed
beyond implementing.
10. However, on the basis of our assessment, a sizeable proportion of firms failed to
demonstrate that they are implementing TCF. This means that senior management in
these firms have failed to create and put into action a plan to meet an existing
regulatory requirement. They have failed to take sufficiently seriously the need to
address TCF risks in their business.
11. Some sectors have performed particularly poorly. Only 22% of small mortgageicon
advisers and 45% of small general insurance advisers met the deadline. Only 52% of
small directly authorised financial advisers met our deadline.8 It is worth noting that
we carried out our assessment of small firms in December 2006 and January 2007.
We therefore expect that some small firms will have made further progress between
January and March and will test this as part of our follow-up work.
Methodology used to assess progress
12. This is the first time we have carried out an industry-wide measurement of progress
against the phases of TCF. Previous assessments have been based on firms’ self reporting.
13. For larger (relationship managed) firms engaged in retail markets we looked at each
firm individually. We considered all relevant information available to us at that time,
including information from usual supervisory contact (e.g. ARROW risk assessment
or thematic visits). And, in some cases, we included the results of specific visits we
made to look at particular TCF-related issues.
14. For wholesale firms we assessed a representative sample of firms where their activities
include a business which deals directly with retail customers, where they contributeicon to
the origination of products which are distributed by other firms to retail customers, or
where they distribute wholesale to firms that distribute direct to retail customers.
15. For small firms9, we conducted a major, statistically valid telephone survey of 659
firms to assess progress against the phases of TCF. We supported this with
verification visits to 5% of the firms surveyed to ensure that the results were correct.
We concentrated the sample around three major sectors where the primary business
is investment, mortgage or general insurance business. We designed the survey to
assess what firms were doing on a range of important TCF issues such as
management behaviours and how these impact for example, on advice and
complaints. We did not focus our survey on whether a firm understood TCF
‘processes’ or TCF terminology as used in our publications on the subject.
Financial Services Authority 5
Action against firms who have not met the deadline
16. Where firms have missed the deadline, we believe that this points to a failure by, or
lack of commitment from, senior management. This failure means that we can only
place limited reliance on these firms’ senior management to deliver the right
outcomes for their customers.
17. We will therefore increase the focus and intensity of our supervisory approach for
these firms. We will take a targeted approach that will depend on the reasons why a
firm failed to meet the deadline, and the scale of the task they face in filling the gap.
Our follow-up work is likely to have significant cost implications for these firms.
18. For relationship-managed firms we will, for example, use tools such as requiring
skilled persons reports, imposing demanding risk mitigation plans with challenging
deadlines, and rigorously reviewing and monitoring progress.
19. The results are particularly disappointing for small firms. However, we were
encouraged that of those firms that failed to meet the deadline, many were making
slow progress rather than failing to engage with TCF at all. We also expect that because
of their size and structure, the scale of the challenge is smaller. So with increased focus,
small firms should now be able to make quick progress through the TCF stages.
20. To support this, we are taking immediate follow-up action with small firms. In line
with our risk-based approach, our primary focus is to target those firms who pose
the greatest risk to our objectives. We will visit every firm which has failed to engage
with TCF and we will conclude these visits by the end of June.
21. We have written to those small firms in the sample which have engaged with TCF but
have failed to meet the deadline and where progress was slow or of poor quality. We
have advised them of the main weaknesses found in their sector to help them assess
the risks present in their own firm. We will also visit 10% of this part of our sample
and where we find that inadequate progress has been made we will take appropriate
firm-specific action.
22. If now, or as a part of future supervisory action, we become aware of significant
actual or potential consumer detriment in a firm of any size that failed to meet the
deadline, we expect to make a referral to enforcement. Given the importance we
attach to senior management this may include considering referrals on the grounds of
senior management failings. We will also consider the case for immediate action in
the form of varying the firm’s permission so that it cannot, for example, continue to
conduct regulated business until it resolves the problems.
Priorities and next steps
23. Where firms have met the deadline, we will continue to look in the first instance to
their senior management to progress work to embed TCF. They need to demonstrate
to themselves and to us how they are treating their customers and whether they are
delivering fair outcomes. This requires a firm to collect information which is
proportionate to its size and nature. And senior management will need to use
this information to identify and tackle any issues and to apply what works well
more widely.
6 Treating Customers Fairly initiative: progress report
24. Some firms are progressing with the development and use of management
information for TCF. But where firms do not have this evidence and/or are not
actively using it, continued poor results from much of our industry-wide thematic
work means that we cannot assume that all is well. Instead, we will need to ask
searching questions to understand what might be going wrong and why. This will
include a greater amount of detailed testing at the consumer interface, such as
interviews with front-line staff and file reviews.
25. In addition, to assist us in testing firms that are unable to evidence that fair outcomes
are being delivered, we are currently developing and piloting a framework through
which potential TCF risk areas in a firm’s culture can be identified. This framework
has been developed not only from our experiences in TCF, but also from our other
work on specific themes, which provide powerful information on the factors, or
‘drivers’, within an organisation which can lead to fair or unfair outcomes. We
anticipate that using this framework will help us (and the senior management in
firms) to understand some of the root causes of unfair outcomes, and therefore
reduce the risk that customers are treated unfairlyicon.
26. So far, we have identified the key cultural ‘drivers’ to be: leadership; strategy;
decision making; controls; internal communication; recruitment, training and
competence; and reward. We believe these drivers are likely to have a significant
influence on behaviours of management and staff, and therefore on consumer
outcomes. For small firms, not all these drivers will be relevant, but we have
identified the key management behaviours in a small firm which can have an impact
on whether a customer is treated fairly.
27. Where relevant, we intend to integrate work using the culture framework and
management behaviours into ARROW risk assessments and thematic work, and we
will also conduct bespoke visits outside the usual ARROW cycle. The elements of the
culture framework and the management behaviours for small firms are outlined in
Annex 1. We will publish more details, as well as examples of good and poor
practice, in July.
TCF a continuing priority for small firms
28. For small firms we already provide a range of TCF online tools and opportunities for
firms to talk directly to FSA staff on TCF.
Financial Services Authority 7
10 See Small Firms
11 See Workshops
12 See www.fsa.gov.uk/Pages/Doing/Events/events/supervisor.shtml
29. TCF will continue to be central to our project work with small retail firms – its core
purpose is to test whether firms are delivering fair outcomes for consumers in key
areas such as clear disclosure documents, suitable advice and fair complaints
handling. In future, small firms can expect even more focus on TCF in their dealings
with us. When feeding back the results of our work to individual firms and the
industry we will focus on explaining how the findings relate to TCF as a whole. And
we will continue to explore how we can reach and interact with small firms on the
subject of TCF.
Existing tools available to help small retail firms make progress on TCF:
We offer materials on principles-based regulation and TCF on our small
firms website10
• Our small firms website is already a popular resource with over 50,000 visits per
month on average.
• We have updated the existing information on the TCF section of the website to
include key findings from the TCF telephone surveys and to include sector specific
examples of good and poor practice.
• The site also includes a TCF self assessment tool which many firms have told us that
they have found helpful.
• Later this year, we will launch sector specific self assessment tools to help firms
move towards TCF becoming business as usual. This work will also cover management
behaviours which drive the culture of a small firm.
We also offer opportunities for firms to engage directly with members
of the FSA on TCF.
• The Firms Contact Centre handles day-to-day queries on general regulatory issues,
including TCF.
• In the last year over 2,500 firms have attended either our free roadshows or taken the
opportunity to have a face-to-face meeting with one of our supervisors at a ‘surgery’. A
further 1,800 have attended industry training courses for small firms.
• This month we are rolling out affordable new regional TCF workshops for small firms
which will focus on the TCF survey findings and how firms can continue to make
progress with their TCF work. These will be available to meet demand and firms can
book their place using our new online booking system.11
• TCF will continue to be a key focus at our free roadshows where firms have the
opportunity to hear directly from us and ask questions.12
8 Treating Customers Fairly initiative: progress report
13 FSA Handbook, SYSC 3.1.11
(1) A firm’s arrangements should be such as to furnish its governing body with the information it needs to play its
part in identifying, measuring, managing and controlling risks of regulatory concern. Three factors will be the relevance,
reliability and timeliness of that information.
(2) Risks of regulatory concern are those risks which relate to the fair treatment of the firm’s customers, to the protection
of consumers, to confidence in the financial system, and to the use of that system in connection with financial crime.
SYSC 3.2.12
It is the responsibility of the firm to decide what information is required, when, and for whom, so that it can organise
and control its activities and can comply with its regulatory obligations. The detail and extent of information
required will depend on the nature, scale and complexity of the business.
14 TCF Management Information cluster report, July 2006
http://www.fsa.gov.uk/pages/Doing/Re...ement_info.pdf
Further deadlines
30. Clearly, firms must already comply with Principle 6 (‘A firm must pay due regard to
the interests of its customers and treat them fairly’) and other FSA Principles and
rules. This means that enforcement or other regulatory action may be appropriate
now if we find firms failing to treat their customers fairly.
31. We believe it is essential that senior management drive real change as rapidly as
possible. The March deadline helped to focus firms’ efforts on TCF and generated
momentum within the industry as a whole. We now need to increase this momentum
so we have decided to set further deadlines.
32. By the end of December 2008 all firms are expected to be able to demonstrate to
themselves and to us that they are consistently treating their customers fairly. One
method of doing this will be to show that they are delivering, in particular, the six
TCF consumer outcomes we have identified (see p2).
33. Firms need to have information to enable them to comply with their regulatory
obligations13. Demonstrating delivery of the TCF outcomes will require using
management information proportionate to the size and complexity of the business.
We are setting an interim deadline to encourage firms to focus on and make progress
in this area. Therefore by the end of March 2008 firms are expected to have
appropriate management information or measures in place to test whether they are
treating their customer fairly.
34. Many firms have found identifying, collecting, and using management information
for TCF challenging. We have already provided supporting material on this subject14.
The key is that firms use information proportionate to the size of their business to
demonstrate that they are treating their customers fairly. For small firms, this
information may be relatively simple. To support firms in meeting the March 2008
deadline for management information we will work more with the industry to help
develop and share good practice, including in our forthcoming publications on the
findings of our work on culture (in July), and on measuring industry-wide progress
against the TCF outcomes (in October).
35. For our part, the assessment of TCF progress will continue to be central to our retail
strategy, and TCF is an overarching priority for all our retail thematic work. We
intend to build on this approach in the next phase of the initiative, including
monitoring progress against the new deadlines.
Financial Services Authority 9
Impact of this new strategy
36. This strategy does not alter the fundamental message to firms since 2004 – they need
to review their business, and consider and implement any changes needed in order to
comply with the FSA Principles.
37. We encourage those firms which have met the March deadline to keep up the
momentum and to progress towards embedding TCF.
38. We can only place limited reliance on senior management in firms that have failed to
meet the March deadline and they can expect costs to be imposed as a result.
39. In all firms, we will challenge senior management to produce evidence that they are
treating their customers fairly and delivering the desired consumer outcomes. As well
as collecting management information, we expect senior management to use the
information effectively.
40. If we are satisfied that a firm has robust systems and controls and the senior
management are reviewing and using reliable management information which
demonstrates that they are treating their customers fairly, we will significantly reduce
the level of testing we carry out on the firm’s culture and at the consumer interface.
10 Treating Customers Fairly initiative: progress report
Annex 1 – Our cultural framework and initial findings
We are developing an approach which examines TCF in firms’ cultures. In our publication in July
2006 we set out consumer outcome one – ‘consumers can be confident that they are dealing with
firms where the fair treatment of customers is central to the corporate culture’.
We are carrying out pilot work, including a visit programme, to identify the key cultural drivers
within organisations that we believe are likely to have a significant influence on behaviours of
management and staff and therefore on consumer outcomes.
The table below set out the drivers, and the associated positive indicators and negative (contra)
indicators of good behaviour, which we have identified from our work so far:
Fair treatment of customers is central to the
behaviour and values of all managers, and they apply
controls and monitoring to ensure that the desired
outcomes are delivered by their staff
Decision making reflects the spirit of TCF. Firm uses
staff, consumer and other external feedback where
appropriate, with timely action. The interests of
customers are properly balanced against those of
shareholders (and other customer groups)
Controls, including management information, are
integral to the firm’s risk framework, protect the
consumer, identify weaknesses and are used by the
firm to improve its treatment of customers
Positive behaviours and attitudes to TCF are a key
criteria in the selection of staff. Effective training and the
maintenance of staff behaviours and values is core to the business
The firm’s reward (including incentive scheme) and
performance management framework throughout the
business is transparent, recognises quality and supports
the achievement of the six consumer outcomes
The firm has a clear vision which supports TCF. TCF is
reflected within the formulation and implementation of
strategic decisions (including change management
programmes). The firm’s risk appetite reflects consumer considerations.
The firm has a clear communication strategy, from
the top to bottom, delivered by key personnel with
employees tested on their understanding and
quality of implementation
Leaders (at any level) cannot articulate what fair
treatment of customers means for them and their staff
and cannot demonstrate that their staff understand what TCF means
The firm’s vision is unclear/blurred or contradicts TCF.
The Board does not consider TCF when making key
decisions about future direction
The firm cannot evidence consumer protection through its
controls, has minimal management information and does
not use this information to improve its treatment of customers
Little evidence of regular and timely communication
across the firm and little demonstration that
the message is understood and implemented by staff
The firm has a basic/inadequate T & C scheme, applied
to staff undertaking regulated activities only, with little
focus on TCF and has a lack of appreciation of how staff
competence has an impact on the consumer
Minimal evidence that decisions reflect any consideration
of the impact on consumers. Firm is slow or
unwilling to react to consumer/staff feedback. Conflicts
between the interests of shareholders and consumers are
consistently resolved in favour of shareholders
The firm’s reward and performance management
framework concentrates on sales and profit without
consideration of quality and achievement of outcomes
i.e. the framework drives poor TCF outcomes
Indicators Contra-indicators
Leadership
Decision making
Controls
Internal
communication
Recruitment, training
and competence
Reward
Strategy
Key driver
Key cultural drivers and high level indicators and contra indicators
Financial Services Authority 11
We have also developed a management behaviour framework suitable for small firms:
Fair treatment of customers is central to the
behaviour and values of the firm, and management are
able to articulate what TCF means for their firm
Through monitoring of the day to day activity,
management ensure that TCF principles are being applied consistently
Positive behaviours and attitudes to TCF are a key
criteria in the selection of staff. Effective training and the
maintenance of staff behaviours can be observed
Management operate a reward structure and performance
management framework that is transparent and recognises quality
When management make key business decisions, the
firm will always assess the impact on TCF
The firm communicates clear messages to staff and
can demonstrate that they have been understood
The management cannot articulate what fair treatment of
customers means to them or the firm
When management make decisions they do not apply
TCF principles
Management do not know if their staff are treating
customers fairly
Management do not communicate effectively with each
other or their staff
The firm has a basic/inadequate T & C scheme, applied
to staff undertaking regulated activities only, with little
focus on TCF and has a lack of appreciation of how staff
competence has an impact on the consumer
Firm concentrates on sales made with bonus payments
and promotion based on quantity not quality
Indicators Contra- indicators
Leadership
Controls
Internal
communication
Recruitment, training
and
competence
Reward
Business planning
Key driver
Management Behaviour framework for small firms
The Financial Services Authority
25 The North Colonnade Canary Wharf London E14 5HS
Telephone: +44 (0)20 7066 1000 Fax: +44 (0)20 7066 1099
Website: Financial Services Authority
Registered as a Limited Company in England and Wales No. 1920623. Registered Office as above.

NO MENTION OF THE BIG FIVE BANKS then!


Also this on the British Bankers association website...

Banks lead progress on treating customers fairly

08/05/2007


Customers can be confident of a fair deal from their bank as UK financial institutions make good progress on implementing the treating customers fairly principle [TCF] set by the Financial Services Authority, the British Bankers' Association said today. The association was speaking following the publication of the latest progress report from the FSA which confirms that the larger financial institutions in particular, including the major retail banks, are making significant progress on TCF implementation.
TCF is central to the FSA's retail strategy and a key part of the FSAs move to more principles-based regulation. The TCF initiative aims to deliver the following outcomes for consumers:
1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture;
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;
3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale;
4. Where consumers receive advice, the advice is suitable and takes account of their circumstances;
5. Consumers 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;
6. Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.
In July last year the FSA set a deadline of March 2007 for firms to implement TCF across a substantial part of their business.
Chief Executive Angela Knight CBE said:
"Banks are committed to treating customers fairly and are working hard to ensure the grass roots staff are up to speed on everything they should be doing. Senior managers are working with the Financial Services Authority to ensure that all banks embed their TCF strategies throughout their businesses."
"British banks have always offered a wide range of products and services to their customers and this treating customers fairly initiative gives regulatory weight to what they have been doing for years. The banks operate in a highly competitive environment and they recognise that TCF is both good business practice and a long term commitment to their customers."
"It is clear from todays FSA report that major retail groups in particular, such as the retail banks, are doing a good job with the FSA's TCF requirements."



For further information, please contact:
Lesley McLeod, PR Director (020 7216 8825 )

Obviously they do not consider the many thousands of account holders who have been driven to despair in trying to even get a response from their bank, let alone get their charges back!

Maybe we should call this person and ask from which planet they get their information from - certainly not british account holders who have suffered unlawful charges and who certainly have NOT BEEN TREATED FAIRLY!!!

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