TCF MI failure raises questions

This is a key year for the Treating Customers Fairly initiative. In March, firms had to meet a first deadline by having appropriate management information in place to test whether or not they are TCF compliant. Yet, 87% of firms assessed by the Financial Services Authority for their June progress update failed to meet the March deadline.

According to the FSA's progress report, it is not lack of enforcement that is preventing brokers from becoming TCF compliant: "All firms that failed to meet the deadline on time have received a strong message that urgent progress is needed."

On 31 July, Hastings was fined £735,000 under TCF regulations after cancelling 4,550 incorrectly priced motor policies. Jayne Owen, chief executive of the financial services training consultancy Corporate Training Partnerships, warned: "TCF is an issue for every firm no matter what the size and the FSA is monitoring smaller brokers' compliance through telephone interviews."

Rebecca Thorpe, associate director at financial services regulatory consultants Bovill, believes that the slow uptake of TCF is due to firms' misunderstanding of their responsibilities in a principles-based regime: "Each firm has to determine what TCF means for its business and its client base; it must implement effective measures to make sure that it consistently provides fair treatment." With the March deadline now gone, the challenge of meeting the new guidelines is one of determining what management information needs to be collated and reported, as well as ascertaining what data needs to be held to produce the required information.

Technology can provide some answers to issues of maintaining correct and consistent data, however, choosing a system capable of integrating with what you have in place already is vital. Owen emphasises: "Much of the raw data should already be available in existing systems, so the gap in capability is in the analysis and reporting area."

Ben Harding, key account manager for financial services at Experian QAS, explains: "Obtaining a standard address at the point of capture is important when trying to become TCF compliant, as consumers must be provided with clear information and kept appropriately informed before, during and after the point of sale." Harding emphasises the advantages of an electronic approach: "Paper-based systems are harder to keep clean with the likelihood that someone will make a mistake or become lazy. Our software looks at current records and gives a percentage guidance of what can be duplicates."

However, it is important to remember that TCF is not just about ticking boxes. In its guide to the regulations, the FSA highlights that "it is only through establishing the right culture that senior management can convert their good intentions into actual fair outcomes for customers." Therefore, while technology can help a broker become compliant, it cannot ensure that a firm's staff is treating customers fairly continually.

Owen believes that combining training and measurement can help a firm make certain that customers are treated fairly throughout the business in the long term: "Training staff about their impact on fairness is key; generic e-learning does not do this. Make sure that TCF is in job descriptions, on team and management meeting agendas and, most importantly, target and measure TCF performance and reward those that succeed."

Whatever method, by the end of December, all brokers are expected to be able to demonstrate both internally and externally to the FSA that they are treating customers fairly.

AT-A-GLANCE COMPLIANCE CHECKLIST

Jayne Owen, chief executive at Corporate Training Partnerships, believes that if a company is Treating Customers Fairly complaint then senior broker managers should be able to answer the following questions:

- Can you articulate what TCF means to your firm?

- How do you use the TCF management information you have?

- How do you know that staff treat customers fairly?

- What has improved for customers as a result of your TCF work?