| Do not shoot the messenger, dear reader; the writing is on the wall. And it has been ever since the Financial Sector Regulation (FSR) Act gave rise to the twin peaks regulators, empowering either of the authorities to issue legally binding standards more or less at will. A recent example is the March 2025 General FSCA Conduct Standard: Requirements for Financial Institutions Providing Financial Education Initiatives. In simple language, this short ‘explainer’ will tell you how to handle your financial education programmes, should your company choose to undertake any. Do not worry, dear reader, there will no doubt be another standard to tell you that you have to undertake financial education, so that the current general conduct standard can apply. Apologies for the ‘too much regulation’ tone, but your writer has just returned from an hour-long FSCA media roundtable that shared the findings of the conduct regulator’s recent foray into institutional complaints handling; as set out in the just-published Complaints Management Industry Review Report 2025. The report was informed by a two-phase interrogation covering consumers (phase I) and industry stakeholders, including Category I financial services providers (Cat I FSPs), retirement funds, and retirement fund administrators (phase II). Phase I polled around 900 financial institutions using a combination of primary and secondary data collection methods including an online industry survey, in-depth industry interviews, review of case files, and an analysis of complaints policies and procedures of financial institutions. The survey work was carried out in 2022 and 2023, soliciting responses from 673 Cat I FSPs, 444 retirement funds, and 61 retirement fund administrators. Phase II was an online survey conducted across 11000 consumers, with around 8% of that total having lodged a complaint with one of the aforementioned industry segments. Making good on your right to complain Olano Makhubela, Divisional Executive: Market Integrity and Decision Sciences at the FSCA, introduced the report as part of the conduct regulator’s core mandate. He explained that one of the six Treating Customers Fairly (TCF) principles requires that customers do not face any unreasonable post-sale barriers to making a complaint. “Financial institutions must ensure that they have proper complaints mechanisms and frameworks in place to enable financial consumers to complain,” he said. He suggested that firms view their internal complaints and complaint resolution processes as a valuable feedback mechanism between FSP and customer (or client). There are plenty of consumer protections offered via South Africa’s statutory ombud schemes, but these were always intended for a final escalation of consumer complaints that could not be resolved by the financial institution. “The ombud schemes should only be approached after the financial institutions have been given an opportunity to address a complaint,” Makhubela said. He offered some additional insights into the survey process, saying that Phase I interrogated financial institutions on whether they had an internal complaints process in place, how the process worked, whether customers were aware of it, and what the turnaround times were like. Phase II explored consumer experiences when they complained to those institutions. Unpacking the survey findings The survey revealed that most financial institutions were organising their complaints data in line with the complaints categories set out under the TCF outcomes; in the Policyholder Protection Rules (PPR) Long- and Short-term; and the FAIS Code of Good Practice. For the most part, financial institutions operated three or four internal complaints escalation levels with most complaints resolved at level one to three. “There is a lack of uniformity in complaints recording and reporting by the financial institutions, and that not all entities have documented processes and procedures for handling complaints,” said the FSCA’s Senior Manager for Disclosure, Advertising, and Market Analysis, Koko Kubelo. “Added to that, policy documents often lack detail about the frequency and nature of training for complaints-handling staff.” Hmm. Sounds suspiciously like another conduct standard percolating… The survey revealed that financial institutions’ complaints handling processes were made available to consumers through various channels, and usually in English. Institutions were, however, coming up short by not making their complaints resolution mechanisms accessible, alongside a range of other inconsistencies that detracted from TCF outcomes. Overall, the financial institutions indicated that it took between one and four weeks to resolve complaints, including those escalated to the highest levels. “Delays were mainly as a result of financial institutions awaiting feedback from business or from external third parties that they work with,” Kubelo said. Benchmarking against Australia, UK The FSCA benchmarked its survey findings against the Australian and United Kingdom regulators, highlighting differences in how these markets dealt with governance arrangements, and their greater emphasis on operational transparency. Both international markets used a mixture of rules- and principles-based supervision for complaints management. Additional discussion with local ombud schemes “indicated that financial institutions are not sufficiently raising the awareness of the internal complaints handling escalations to consumers.” The ombud schemes would like greater clarity around processes and procedures for lodging complaints with providers. Commenting on the consumer survey, the FSCA surmised there is a fairly low rate of complaints being lodged. Around 57% of the sample had lodged complaints with retirement funds, with two-thirds of complainants expressing regret at having taken up the financial product or service in question. Consumers were asked whether they were aware of ways that they could lodge a complaint directly with the financial institutions, with an alarming 66% of respondents saying no; around half of respondents were aware they could approach an ombud scheme. “This is testament to the fact that consumers know more about external dispute handling mechanisms such as the ombud offices than they do about the internal processes and procedures with their financial institutions; this can and should be improved,” said Kubelo. The FSCA undertook a deep dive into the 8% of survey respondents who had complained directly to a financial institution, publishing the distribution as Cat I FSPs (31%), retirement funds (30%), and only 9% with fund administrators. The remaining 30% said they had lodged complaints with other financial institutions, likely banks and insurers. For some more bad news, around two-thirds of these consumers indicated they were dissatisfied with the complaints handling processes followed by financial institutions, and 63% were dissatisfied with the eventual complaint’s resolutions. Four in ten consumers whose complaints were escalated at a financial institution reported that their complaints were not subsequently resolved. Consumers were also unhappy with the accessibility of the complaint’s mechanisms, their ability to get information about the processes for lodging a complaint, and inconsistent feedback after their complaints were lodged. Plenty of work for the statutory ombud scheme On the balance of evidence, financial institutions still have some way to go before they get a five-star rating for their approach to the complaints-focused TCF principle. And until such time as they do, the ombud schemes will have their hands full. Consumers were asked how financial institutions might improve the process, starting with the commonsense trio of improved communication, prompt resolution, and thorough investigation. But it seems almost inevitable that the FSCA, as conduct regulator, will get involved. Kubelo offered a long list of possible interventions to improve complaints resolution. First, financial institutions must be proactive in soliciting feedback from consumers to identify areas for improvement. Second, they must adopt a uniform approach to categorising complaints and to the capture, recording, and reporting of complaints-related data. |
Sloppy complaints handling could trigger the next conduct standard avalanche
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