effective complaint handling a discussion document

8/22/2019 Effective Complaint Handling a Discussion Document

1/24

1

Effective complaint handling a discussion document

Written for Consumer Focus by Cosmo Graham

Cosmo Graham is a Professor of Law at the School of Law, University of Leicester and

Director of the Centre for Consumers and Essential Services(http://www2.le.ac.uk/departments/law/research/cces).

He has researched and written widely on complaint handling, regulation of essentialservices, competition law and public law.

1. Introduction

Complaints handling matters to consumers. When things go wrong, they want the issue

resolved as quickly as possible, with the minimum of fuss and an appropriate response.

They can respond to poor complaint handling, not only by removing their custom, but also by

publicising their dissatisfaction through social networking. Consumer Focus has a long track

record in pushing for improvements in complaint handling.1 The Government is developing

wide ranging changes to the landscape of consumer law.2 Its prime objective for consumer

policy is to empower consumers to make wise decisions about buying goods and services.

Empowerment has a number of dimensions, such as choice and information, but a critical

component is the ability of consumers to obtain effective redress when something goes

wrong. Given this background, Consumer Focus is publishing this discussion paper to

examine the current state of complaint handling in these sectors to ensure that progress

continues to be made on an issue which is vital to consumers.3

The discussion on the future of complaint handling in these sectors takes the following

approach. In the first section the aims of effective complaints handling and the minimum

requirements for internal systems are examined. The next section looks at how the existing

internal complaint handling systems measure up in relation to these principles.

1 . See, for example, Consumer Focus ScotlandResponse to the Scottish Public ServicesOmbudsman consultation on a statement of Complaints Handling Principles and Guidance on aModel Complaints Handling Procedure (2010) available at:http://bit.ly/x7VREl(accessed 22/08/11);Consumer Focus Press Release 8 December 2010 Consumer Focus helps consumers by publishingenergy complaints data available at:http://bit.ly/A4CYAV(accessed 22/08/11); S Brooker Lessonsfrom Ombudsmania (NCC, 2008).2. BIS Empowering and Protecting Consumers: Government response to the consultation on

institutional reform (2012) available at:http://bit.ly/qFjuhR(accessed 09/05/12).3

. Note also European Commission The use of alternative dispute resolution (ADR) as a means toresolve disputes related to commercial transactions and practices in the EU (2011) available at:http://bit.ly/xwcfoL
http://www2.le.ac.uk/departments/law/research/cceshttp://www2.le.ac.uk/departments/law/research/cceshttp://www2.le.ac.uk/departments/law/research/cceshttp://bit.ly/x7VRElhttp://bit.ly/x7VRElhttp://bit.ly/x7VRElhttp://bit.ly/A4CYAVhttp://bit.ly/A4CYAVhttp://bit.ly/A4CYAVhttp://bit.ly/qFjuhRhttp://bit.ly/qFjuhRhttp://bit.ly/qFjuhRhttp://bit.ly/xwcfoLhttp://bit.ly/xwcfoLhttp://bit.ly/xwcfoLhttp://bit.ly/qFjuhRhttp://bit.ly/A4CYAVhttp://bit.ly/x7VRElhttp://www2.le.ac.uk/departments/law/research/cces


2/24

2

The same approach is then followed for external redress systems: the basic principles are

discussed, followed by a brief assessment of the existing systems. The specific issue of

vulnerable consumers is then addressed.

The penultimate section looks at the effect of technological developments on case handling.

Finally, the concluding section has conclusions and recommendations for the future.

1.1 The aims of complaint handling

An effective complaint handling system must have at least two levels: a company level

system (which is called internal throughout this paper) and a means of redress outside the

company (which is called external throughout this paper). The importance of external

redress mechanisms for consumers is recognised in research carried out by DJ S for

Consumer Focus and also in research done for Ofcom.4 In terms of the sectors this paper is

concerned with, two of them: water and passenger transport, do not meet the criteria of

having an external body for complaints. In relation to water services and rail transport, all

that can happen is that the statutory consumer body can become involved with the complaint

and help the consumer to resolve the issue with the company. Much of the bus industry

lacks an external redress body, although there is a little known and used Bus Appeals Body5

which deals with complaints relating to England and Wales.6

An effective complaints handling system will be accessible, it will process them fairly and

without delay and give redress in appropriate circumstances (this is all discussed in more

detail below). There is, however, another side to effective complaint handling which is

recognised in the literature, which is the ability to deal with systemic issues. In other words,

an effective complaint handling system does not simply deal with complaints on an individual

basis but it also generates information which will improve the service and prevent complaints

happening in the future. This is widely recognised in relation to internal complaints handling

systems for commercial companies where it is often said that complaints are a valuableresource for learning about what customers think of the companys offering. This is now

equally recognised in the context of external redress systems, whether they are concerned

with the public or the private sector.7

4 . DJ S Consumer Experience of Complaint Handling is Six Sectors, Research Report for ConsumerFocus (2011,), OfcomA Review of Consumer Complaints Procedures (2010) at 5.4.5 .http://bit.ly/yG3J kt(accessed 05/08/11)6 . It only had forty-one cases in 2010, of which it only had to make decisions on thirty-two, nine

having been withdrawn before the hearing.7 . For public sector ombudsmen this is discussed in T Buck et al The Ombudsman Enterprise andAdministrative justice (2011, Ashgate) ch 5.
http://bit.ly/yG3Jkthttp://bit.ly/yG3Jkthttp://bit.ly/yG3Jkthttp://bit.ly/yG3Jkt


3/24

3

When dealing with an area which is regulated, this means passing information on systemic

issues onto the regulator, as well as discussing matters with the companies complained

against.

2. Principles of good complaint handling internal

There is a substantial measure of agreement within the literature, both academic and

practical, public and private sector, over the principles that characterise good complaint

handling systems.8

This is consistent with the consumer experience, as reported in research

done for Consumer Focus on consumer experience of complaint handling which

investigated, among other things, what consumers saw as an ideal complaints handling

process. The key issue is not, therefore, dispute about the principles but the question of

whether or not they are implemented in practice and how they are interpreted.

In previous work,9

we identified six principles of good internal complaint handling:

1. Highly visible procedures including clear information about how to make and

pursue a complaint with a single point of contact; and clear and accurate feedback on

how the complaint is processed and escalated.

2. Easy and free access removal of all unnecessary access barriers; provision of

free or low-cost phone numbers and call back facilities.

3. Effective company protocols to achieve high levels of quality assurance and

performance. These must include a sector-wide, well-understood and accepted

definition of what constitutes a complaint; accurate recording methods including

provision of customer reference numbers at the outset; secure and efficient data

handling; and follow up procedures to check consumer satisfaction with the way that

complaints are handled.

4. Fairness and consistency treating all customers fairly and with respect; having

consistent processes for resolving complaints and determining outcomes.5. Responsiveness clear and appropriate time limits for resolving the majority of

consumer complaints and, where necessary, flexibility for dealing with complex

complaints together with keeping the complainant informed.

8 . For internal complaint handling see: R J ohnston Linking complaint management to profit (2001)International Journal of Service Industry management, 12, 60, R J ohnston and S Mehra Best-practice complaint management (2002)Academy of Management Executive, 16, No 4, 145, Office ofConsumer Affairs (2002) Consumer Complaint Management; A Guide for Canadian Business Ottawa,

Canada.9 . George, M., Graham C and Lennard, L (2005) Future Services:Putting Things Right: complaintshandling and dispute resolution in the utilities University of Leicester/CAN.


4/24

4

6. Organisational ownership and commitment the importance of good complaint

handling and of regular analysis of complaints data should be understood and

supported at all levels throughout the company. Substantial efforts should be made

to ensure that the most effective organisational structures and procedures are in

place, including robust staff training and monitoring.

These can be set against the BSI principles:10

BSI ISO Principles for complaint handling

Visibility: Information about how and where to complain should be well publicized to

customers, personnel and other interested parties.

Accessibi li ty: A complaints-handling system should be easily accessible to all

complainants. Information should be made available of the details of making and resolving

complaints. The complaints-handling process and supporting information should be easy to

understand and use. The information should be in clear language. Information and

assistance in making a complaint should be made available in whatever languages or

formats that the products were offered or provided in, including alternative formats, such as

large print, Braille or audiotape, so that no complainants are disadvantaged.

Responsiveness: receipt of each complaint should be acknowledged to the complainantimmediately. Complaints should be addressed promptly in accordance with their urgency.

The complainant should be treated courteously and be kept informed of the progress of their

complaint through the complaints-handling system.

Objectivity: Each complaint should be addressed in an equitable, objective and unbiased

manner through the complaints-handling process.

Charges: Access to the complaints-handling process should be free of charge to thecomplainant.

Confidentiality: personally identifiable information concerning the complainant should be

available where needed, but only for the purposes of addressing the complaint within the

organization and should be actively protected from disclosure, unless the customer or

complainant expressly consents to its disclosure.

10 . BSI ISO 2004Guidelines for complaint handling in organisations.


5/24

5

Customer-focused approach: the organization should adopt a customer focused approach,

should be open to feedback including complaints and should show commitment to resolving

complaints by its actions.

Accountabil it y: the organization should ensure that accountability for and reporting on the

actions and decisions of the organization with respect to complaints handling is clearly

established.

Continual improvement: the continual improvement of the complaints-handling process

and the quality of products should be a permanent objective of the organization.

The overlaps between the two lists are obvious.11

3. Current sectoral arrangements

This section assesses how well currently existing arrangements meet these criteria. A

preliminary point is that, in all the sectors except passenger transport, there is a requirement

on suppliers to have an internal complaint handling system and there are more or less

detailed rules for such systems.

3.1 Evidence from the energy sectorThe obligations that energy companies must meet in relation to complaints are set out in the

Gas and Electricity (Consumer Complaints Handling Standards) Regulations 2008. These

follow on from the Consumers Estate Agents and Redress Act 2007 (CEAR) and are clearly

compliant with any interpretation of good principles of complaint handling. Thus the

complaints procedure must be in clear and intelligible language, it must be in a clear and

prominent position on the web-site, allow for complaints to made orally or in writing

(including e-mail) and provide sufficient resources for the handling of complaints. There is

now a greater emphasis on consumers being able to resolve their complaints with their gasor electricity company. The Citizens Advice Consumer Service (formerly Consumer Direct)

provides a single point of contact for consumers covering all markets for information and

advice. It provides a first point of advice and information, with referral to Consumer Focuss

Extra Help Unit where required. Citizens Advice also make referrals to the Ombudsman and

will refer escalated complaints back to the energy companies dedicated complaints teams.

11 . BSI emphasises confidentiality where we would place this as an element of our third category.


6/24

6

The Energy Ombudsman covers all energy complaints; and Consumer Focuss Extra Help

Unit deals with individual complaints relating to disconnection or involving a vulnerable

customer.

The Gas and Electricity Regulations also provide for a common definition of a complaint as

well as giving detailed specifications for the recording of complaints. What the Regulations

do not deal with, and could not deal with, are issues around the implementation of the

principles, such as whether customers are dealt with respect, whether decisions are

consistent and whether there is real organisational commitment to the complaints procedure.

In assessing the performance of energy companies, it is worth bearing in mind that, there is

a significant level of distrust of energy companies by consumers.12 Ofgem has

commissioned Harris to undertake research into the working of complaint handling by energy

companies over the last three years, with the most recent research published in March

2012.13

This research found that dissatisfaction levels remained higher than satisfaction

levels, however, satisfaction with complaint handling has improved year on year since 2009,

with 40 per cent of consumers saying that they were happy with the complaints handling

process in 2012.

Generally satisfaction was higher in relation to the initial stages of the complaint with much

lower satisfaction for the later stages, such as calling back and finding a resolution to the

complaint. This is particularly important because complaint handling required a significant

amount of contact with the company and also because the research found that there was a

discrepancy between the companies perception of when a complaint had been resolved and

that of the customers perception. This is consistent with research that DJ S did for Consumer

Focus where the levels of satisfaction with the complaint handling process were quite low,

with only just over a third of consumers satisfied with the speed of response, quality of the

information and the understanding of the issue.14 This same research also uncovered a

failure to tell consumers of their right of redress with the Ombudsman, as only 21% of energy

consumers said that they were told that they could take their complaint to an independent

body.15

12 . See Too many hurdles: information and advice barriers in the energy market, November 2011,Centre for Consumers and Essential Services, University of Leicester and Eaga Charitable Trusthttp://bit.ly/AaYy8Z13

. OfgemCustomer complaint handling research report (2012) available at:http://bit.ly/H4cdZG(accessed 10/04/2012)14

. DJ S Consumer Experience of Complaint Handling is Six Sectors, Research Report for ConsumerFocus (2011, unpublished at Table 2.215 . Ibid at Figure 2.8.
http://bit.ly/AaYy8Zhttp://bit.ly/AaYy8Zhttp://bit.ly/H4cdZGhttp://bit.ly/H4cdZGhttp://bit.ly/H4cdZGhttp://bit.ly/H4cdZGhttp://bit.ly/AaYy8Z


7/24

7

The evidence in relation to energy company complaint handling suggests that there is still

some way for the companies to go in having effective complaint handling systems,

particularly for micro-business customers, where only a third are happy with the way energy

companies handle complaints.

This is confirmed by Ofgem imposing fines on British Gas and RWE Npower of 2.5 and 2

million respectively for breaches of the complaint handling regulations and the continuing

investigation into EDF Energy on this issue.

3. 2 Evidence from telecommunications

Complaint handling by telecommunications companies has been an area where there have

been difficulties in the past, which have led the regulator, Ofcom, to make some significant

changes. The legislation provides that Ofcom has a duty to ensure that providers have

procedures for the handling of complaints which are easy to use and effective. This was

originally implemented by Ofcom requiring all providers to have an approved Code of

Practice.

Ofcoms own research found, however, that a significant proportion of customers have a

poor experience when pursuing complaints with their provider.16

Ofcom highlighted that around a third of complaints were not resolved within twelve weeks

(they estimated this constituted three million complaints), that where complaints were not

resolved within three weeks, customers found it very difficult to get their providers to

recognise that they were making a complaint and that those who were unable to resolve

their complaint within twelve weeks were more likely to suffer financial stress. This was

entirely in line with the research done by DJ S for Consumer Focus, which put

telecommunications at the bottom of the consumer experience in terms of complaint

handling.

Ofcom introduced a new requirement on all providers, from J anuary 2011 that they must

comply with the minimum obligations set out in a new Ofcom Code of Practice.17

16 . OfcomA Review of Consumer Complaints Procedures (2010).

This

requires that the procedures are transparent, accessible, effective, facilitate appropriate

access to alternative dispute resolution and retain appropriate records. Again, these

Guidelines mirror the basic principles of good complaint handling. The same questions arise

as in energy: to what extent will these guidelines be implemented effectively and what role

will external redress mechanisms play in raising standards within the industry?

17 . available at:http://bit.ly/zoew23(accessed 11/08/11).
http://bit.ly/zoew23http://bit.ly/zoew23http://bit.ly/zoew23http://bit.ly/zoew23


8/24

8

3.3 Evidence from the financial services sector

Firms working in this sector are required to comply with the rules on complaint handling laid

down by the Financial Services Authority (FSA). Again, the rules are consistent with the

broad brush general principles, but there are some interesting points within them. For

example, the FSA rules are the only ones which say, explicitly, that complaint handling must

be free of charge.18

In relation to certain types of business, the firm must put in place procedures which allow it

to identify root causes common to types of complaints, whether those root causes affect

other processes or products and taking action, where reasonable to correct them.19 Finally,

firms are asked to consider whether they ought to compensate or provide remedies to those

customers who may have suffered detriment from problems or root causes and should

receive a remedy, even though they have not complained.20

The FSA conducted a review of complaint handling within banking groups in 201021 within

the financial services sector complaints against banks are much higher than any other

category of firm, running at between 800,000 to 1 million complaints per half year (with an

exceptional spike of 2 million complaints in the second half of 2009), rising to around 1.3

million in 2010.22

A lack of senior management engagement and accountability for the delivery of fair

complaint handling;

The review found poor standards of complaint handling within most of the

banks assessed, including:

Poorly designed staff incentive schemes that made branch staff reluctant to pay

redress to customers, even in situations where the bank was at fault;

Poor quality complaint handling by staff in branches and general call-centres leading

to inadequate investigations, poor decision making as to the outcome of the

complaint and unsatisfactory correspondence with customers;

Complaint handling procedures that led to staff issuing multiple, repetitive responses

to customers, forcing them to restate their complaint a number of times in the face of

ongoing negative responses from the bank;

18 . FSA Handbook Disp.1.3.1A.19 . Ibid Disp 1.3.3.20 . Ibid Disp 1.3.521 . FSA Review of Complaint Handling in Banking Groups (2010).22

. For comment see Consumer Focus Press release 30 March 2011 available at:http://www.consumerfocus.org.uk/news/consumer-focus-response-to-fsa-complaints-published-today(accessed 23/08/11).
http://www.consumerfocus.org.uk/news/consumer-focus-response-to-fsa-complaints-published-todayhttp://www.consumerfocus.org.uk/news/consumer-focus-response-to-fsa-complaints-published-todayhttp://www.consumerfocus.org.uk/news/consumer-focus-response-to-fsa-complaints-published-today


9/24

9

The failure of banks to learn from previous complaints and to make changes to

prevent similar complaints arising in the future.

The banks concerned agreed to make major changes to their complaint handling systems,

although subsequent to this report RBS and NatWest have been fined 2.8 million by the

Financial Services Authority for poor complaint handling.23

In May 2011, the FSA introduced new rules on complaint handling for firms which:

increased the award limit by the Financial Ombudsman Service from 100,000 to

150, 000; abolished the two stage complaint handling process to make sure firms

resolve complaints fairly and do not dismiss them the first time, requiring persistencefrom the customer to pursue the complaint; required firms to identify a senior

individual responsible for complaints handling; and set out guidance on how firms can

meet existing requirements relating to root cause analysis; further guidance requiring

them to take account of ombudsman decisions and previous customer complaints.

This is consistent with the work

done by DJS for Consumer Focus which put satisfaction with complaint handling in financial

services towards the bottom of the list, with only telecommunications below it.

24

The number of banking complaints was at the lowest level since 2008 H1 at 812,197.

This is a 10% decrease on the previous half year and is 22% down on a year ago.

The FOS has recorded lower numbers of complaints in the banking sector as well(discounting PPI complaints)

It should be evident from this brief discussion that the FSA has addressed the issue of

internal complaint handling seriously and it is important that this momentum is not lost in the

transition to a new Financial Conduct Authority.

The FCA and FOS will need additional powers to publish information on number of

complaints by product and by market share. This information would empower consumers tochoose a product or a provider on the basis of customer service as well as on headline price

and product features

23

. See FSA Press Release 11 J anuary 2011 available at:http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/003.shtml24 . See FSA press release 27 May 2011 available athttp://bit.ly/w9Z9b4
http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/003.shtmlhttp://www.fsa.gov.uk/pages/Library/Communication/PR/2011/003.shtmlhttp://bit.ly/w9Z9b4http://bit.ly/w9Z9b4http://bit.ly/w9Z9b4http://bit.ly/w9Z9b4http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/003.shtml


10/24

10

3.4 Evidence from the postal sector

The standards to which postal operators, of whom the most important is Royal Mail, must

adhere to are set down in the Postal Services (Consumer Complaints Handling Standards)

Regulations 2008 which are very similar to those applying in energy.

Research by DJS for Consumer Focus indicates similar levels of consumer satisfaction for

complaint handling in postal services as are found in energy. Where items of low value are

sent Royal Mail itself says, We do not always resolve issues quickly. Nor are we good at

feeding customer comments back to delivery office level so that in future we can get it right

first time.25

Under the Postal Services Act 2011, on 1 October 2011, responsibility for the regulation of

postal services passed to Ofcom.

Given that Royal Mail has a significant number of complaints (over 1.2 million in 2010/11,

yielding some 12.5 million in recompense according to Royal Mail26 almost all of which

are dealt with in-house (some 350 cases per year are handled by the external

redress mechanism POSTRS27

) this is an area where more research needs to be

done to try and understand how well the internal complaints handling system is

working.

Following protracted engagement by Consumer Focus with Royal Mail, significant changes

were made by Royal Mail to its complaints handling process in 2011. The changes related to

the structure of the process, its operation and its communication material with consumers.

However, more evaluation needs to be done to ascertain whether the benefits that should

have accrued to consumers have actually happened.

3.5 Evidence from the water indust ry

Under the Water Industry Act 1991 water companies are required to have established

procedures for dealing with customer complaints although there is no specification as to the

content of these procedures.

25 . Royal MailAnnual Report 201126

. Complaints Figures 2010-2011, Licence Condition 4 Part IV 2010-11, Annex A: NationalSummaryhttp://bit.ly/AsnVpS, accessed 23 April 201227http://bit.ly/J zw0mr, accessed 23 April 2012
http://bit.ly/AsnVpShttp://bit.ly/AsnVpShttp://bit.ly/AsnVpShttp://bit.ly/Jzw0mrhttp://bit.ly/Jzw0mrhttp://bit.ly/Jzw0mrhttp://bit.ly/Jzw0mrhttp://bit.ly/AsnVpS


11/24

11

The Guaranteed Service Standards Scheme (GSS) sets standards for responding to

complaints, for example, an acknowledgement must be given within five days while the

companies are given forty days to achieve resolution of a complaint. Failure to meet these

standards should result in the payment of compensation to the customer. Ofwat does not

provide any guidance as to the principles that should inform the design of company

complaint handling systems. It has undertaken a review of company complaint handling

systems and CC Water (the statutory consumer representative body) conducts an

assessment of company complaint handling procedures which include site visits.

According to CC Water, all companies have a complaints procedure in place and most of

them operate a two stage procedure. At Stage 1 the customer writes to the company and the

company responds. At Stage 2 if the customer is not satisfied they write to the company

again and a more senior member of the company responds. If a resolution cannot be

reached at this stage, CC Water will intervene and try to reach a settlement. If the

complainant is still not happy CC Water will carry out an investigation. In certain rare

circumstances, CC Water may escalate the complaint to Ofwat. In addition, Ofwat has, since

April 2010, introduced a service incentive mechanism which, in broad terms means that

company performance on a number of measures, including complaint handling will be

published and that poor performance may have the consequence that the company incurs a

financial penalty which is imposed through the price control mechanism.

So, although not that much is known about how water companies handle complaints, a

number of comments can be made. First, the Ofwat review of complaints handling

concentrated on the initial contact stage and emphasised the importance of clear

signposting, procedures which were easy to understand and use and the process should be

clear and jargon free and give timescales for dealing with the complaint. Based on these

criteria, Ofwat found that there were a number of areas where there was room for

improvement, for example, in relation to access arrangements for vulnerable consumers.28

28 . See

Secondly, the two stage complaints procedure is something that the FSA and FOS have

tried to remove in the context of the financial services industry, because they thought that it

was being misused. Given that CC Water assesses company complaint handling

procedures, any such misuse would presumably have been picked up. Thirdly, the number

of complaints against water companies has been decreasing since 2007 and, in CC Waters

opinion, this is due to improvements in the companies complaint handling procedures.

http://bit.ly/xVVh15(accessed 09/08/11).
http://bit.ly/xVVh15http://bit.ly/xVVh15http://bit.ly/xVVh15http://bit.ly/xVVh15


12/24

12

The DJS Report for Consumer Focus suggests that customers in the water sector are more

satisfied with complaint handling procedures than in energy, telecoms, post or financial

services.

The approach to complaint handling in the water industry is different from other sectors.

First, although there is no Ombudsman service, the Consumer Council for Water has a

regional presence and investigates and seeks to find agreement to customer complaints.In

Scotland, as the water companies are still in public ownership complaints are referred to the

Scottish Public Services Ombudsman. Secondly, complaints statistics include only written

complaints which, given the most common form of complaining in other sectors is via

telephone, may give a distorted picture. Thirdly, despite CC Waters ongoing assessment

work, Ofwats review of complaint handling identified some very basic problems with

procedures, such as providing telephone contact hours and making the procedure

accessible on company websites, which suggests that there are further improvements which

could be made. Fourthly, the Service Incentive Mechanism is an interesting idea but there is

a question over whether it really leads to improvements in complaints handling, given the

time scales within which it works. Finally, there seems to be a lack of clarity or published

guidance about what constitutes good practice in terms of complaint handling in this sector.

3.6 Lessons from the transport sector

There is very little information available about complaints handling in the bus industry. A

report for Passenger Focus summed up the issue:

Overall, there is great variation in the way that operators and local transport authorities

handle complaints about bus services. This study has highlighted that at present there is no

single view within the bus industry on what constitutes a complaint and there is no way of

measuring the overall number of complaints being made. What is clear is that the number of

actual complaints made is the tip of the iceberg.29

There is even less information available about how rail companies handle complaints, even

though passengers may use Passenger Focus if they are dissatisfied with the way that their

train company has handled their complaint.

This is an important area for consumers, which has been neglected.

29 . Passenger Focus Complaints Handling Research (2009)


13/24

13

4. External redress systems

4.1 Principles of redress

In terms of the criteria that external redress systems should meet there is substantial

agreement about these principles. There is a BSI standard for dispute resolution which is

external to organisations,30 and the British and Irish Ombudsman Association (BIOA) has set

out criteria for membership. BIOA has two classes of members: Ombudsman and complaint

handlers and for the former, the criteria are: independence, fairness, effectiveness,

openness and transparency and accountability.31 For complaint handling the criteria are:

clarity of purpose, accessibility, flexibility, openness and transparency, proportionality,

efficiency and quality outcomes. For the purposes of this report, ten principles are identified,

which cover all the same ground as BIOA and the BSI principles.32

These are:

1. Information: clear information about a consumers entitlement to a good or

service, as well as clear information about complaint processes

2. Accessibility: complaint handling systems should be free of charge and fully

accessible to all consumers, including people in vulnerable situations.

3. Consumer support and empowerment: the ability to call on third party help when

making a complaint.

4. Fairness: processes and decisions need to be fair and based on public available

rules and criteria.

5. Effectiveness and performance: dealing with complaints in a timely fashion,

ensuring positive improvements in service delivery and performance monitoring

and auditing.

6. Resolution and redress: the ability to resolve the problem, a range of remedies,

including financial compensation and the ability to tackle systemic issues.

7. Independence: independent of those complained against.

8. Accountability: publicly available information on how the service works and how it

is governed.9. Resources: adequate resources and flexibility to deal with present and future

demands.

10. Consumer involvement: complaint handling systems need to be informed by

consumers views and experiences.

30 . BSI ISO 10003:2007 Guidelines for dispute resolution external to organisations31 . See BIOAhttp://bit.ly/zQZYTW(accessed 10/08/11)32 . See also: Which? (2006) The Right to Redress: A model ombudsman system Campaign Briefing,

London Consumers Association, Department of Industry, Science and Tourism (1997) Benchmarksfor industry based customer dispute resolution schemes Canberra, Australia. Available at:http://bit.ly/yzUDzb (accessed 10/08/11)
http://bit.ly/zQZYTWhttp://bit.ly/zQZYTWhttp://bit.ly/zQZYTWhttp://bit.ly/yzUDzbhttp://bit.ly/yzUDzbhttp://bit.ly/yzUDzbhttp://bit.ly/zQZYTW


14/24

14

There are five external redress schemes to assess: Energy Ombudsman,

Telecommunications Ombudsman, Communications and Internet Services Adjudication

Scheme (CISAS), Financial Ombudsman Service (FOS) and the Postal Redress Service

(POSTRS). Of these, two of them are arbitration schemes (CISAS and POSTRS), while the

other three are Ombudsman. FOS is a statutory scheme whereas the Energy and the

Telecommunications Ombudsman are schemes which have been approved by their

respective regulators as meeting the relevant criteria for a redress scheme. The Energy and

Telecommunications Ombudsman are run by Ombudsman Services, who also run a scheme

for estate agents, chartered surveyors and copyright licensing. All three ombudsman

schemes are Ombudsman members of BIOA. CISAS and POSTRS are run by IDRS, which

is a subsidiary of the Chartered Institute of Arbitrators, and IDRS is a complaint handler

member of the BIOA. This means that they abide by the BIOA principles of good complaint

handling. All of the schemes are free of charge for consumers to use.

4.2 Implementation issues

Information and accessibility

With the exception of FOS and the Energy Ombudsman, none of these schemes are very

well known to the general public.33

This is not necessarily a problem, provided that

customers with unresolved complaints are given information about the schemes, either by

the company or by a third party. There is, however, evidence that there is inadequate

signposting of Ombudsman services. In research done for Consumer Focus by DJ S the

evidence suggested that only one quarter of consumers were told that they could take their

complaints to an independent body (in telecoms, the number was only 12%). Failure to

inform customers about the redress services offered by the Energy Ombudsman was one of

the reasons behind Ofgem fining British Gas 2.5 million in J uly 2011. Ofcoms research into

the consumer experience of complaint handling highlighted low awareness of alternative

dispute resolution (ADR) schemes and this was one of the reasons that the new Ofcom

approved Code of Practice places much greater emphasis on providers signposting theexistence of the schemes to customers. Concerns have also been raised about the small

number of cases heard by POSTRS, particularly in light of the number of complaints

received by the Royal Mail.

33 . OfcomA Review of Consumer Complaints Procedures (2010) Figure 6 gives data. Although FOSreports only 17% unprompted awareness Annual review 2010-11.


15/24

15

There is an additional point in terms of accessibility. All external redress schemes have

terms of reference, which set out what sorts of disputes they can cover and they can only

deal with disputes against companies which are members of their scheme. This can be a

serious issue. In telecommunications, the matter is exacerbated because there are two

external redress schemes, the Telecommunications Ombudsman and CISAS, which may

add a level of confusion to customers. There is also PhonepayPlus, which deals with

complaints against premium rate providers, a distinction that may not be obvious to many

consumers. Even as regards its members, the Telecommunications Ombudsman seems to

get a significant number of contacts which are outside its jurisdiction, that is, about three

quarters of the contacts. Of concern is the fact that the Energy Ombudsman also receives a

high number of calls that are outside its remit but collects no information on them.

Consumer support and empowerment

All the schemes allow for third parties to help consumers bring complaints.

Fairness

Consumer research conducted by the external redress schemes and others indicates that

consumers perceive the operation of these schemes as fair.

Effectiveness and performance

This section concentrates on the ability or willingness of external redress systems to address

systemic issues and the procedures in place to do so. In terms of individual cases, the

evidence suggests that the schemes work in general in an effective and timely manner. At

one end of the spectrum, the arbitration services run by IDRS, CISAS and POSTRS, seem

the least interested in looking at systemic issues, because they are focused on arbitrating,

that is, deciding, on single cases. In the initial years of its operation CISAS would make good

practice recommendations in its Annual Reports, but this practice has been discontinued and

POSTRS follows the more recent CISAS model. FOS is at the opposite end of the spectrum.It has a number of Memoranda of Understanding, most importantly with the FSA and the

OFT. In particular, they have a co-ordination committee to help to identify emerging issues

that could lead to widespread consumer detriment and to co-ordinate each organisation's

separate response to these.34

By contrast neither the Energy Ombudsman nor the

Telecommunications Ombudsman seems to be effective in communicating issues of

systemic concern to the regulator.

34 . See FOS, FSA and OFT Consumer Complaints (emerging risks and mass claims) FS 11/2 (2011)for more details.


16/24

16

Resolution and redress

All the schemes mentioned above have the ability to make decisions which are binding upon

their members and to offer a range of remedies, which include compensation. Levels of

compensation should be kept under review.

Independence

This is not an issue with any of the external schemes. Decision making on individual

complaints is clearly done independently of any other governance issues and there has been

no indication that there has been any intervention by member companies whenever the

ombudsman or adjudicator has wanted to raise issues of wider concern.

Accountability

All the schemes publish information about how they work. The issue in relation to them is

about whether sufficient information is published and whether or not it is published on a

consistent basis. This has been particularly noticeable in relation to the annual reports of the

Telecommunications Ombudsman where the presentation of information has varied over the

years, making it very difficult for an outside observer to chart trends. By comparison,

information about CISAS is recorded consistently across the years.

There is an additional issue here, which is the vexed one of whether or not individual

company performances should be identified. This is already done in the water industry

although that is one based on regional monopolies. It is however also done by FOS and by

the Australian Telecommunications Ombudsman. By contrast, this is not done in relation to

energy, telecommunications or posts in this country. Consumer Focus publishes information

on the performance of energy companies in relation to the number of consumer contacts to

independent organisations for advice or support with an energy problem. The different types

of complaint have been weighted to reflect the seriousness of the complaint and the time

and effort spent by the consumer to get their problem resolved.35

35 . For example Consumer Focus Press release 9 December 2011 available at:

Given the chargingsystems that are operated, the redress services must have this information available

internally.

http://bit.ly/xOkIgR
http://bit.ly/xOkIgRhttp://bit.ly/xOkIgRhttp://bit.ly/xOkIgRhttp://bit.ly/xOkIgR


17/24

17

We should note Ofwats point about the reputational effect of complaints data for companies

and how this might provide an additional incentive for them to improve their performance.

The Hunt review of FOS was clear about this: information about complaint performance is

one relevant factor that consumers may wish to take into account in making a purchasing

decision and I see no legitimate justification for withholding it as a matter of principle.36

Resources

This is potentially a greater concern, especially with those external redress organisations

that are membership bodies. Ombudsman membership of the BIOA requires, however,

adequate staffing and funding. Arrangements such as those for Ombudsman Services and

IDRS make sense in this context because they allow different redress schemes to share

common costs and back office functions and thus operate more economically.

The problem for the schemes has not been a lack of resources per se but the problems that

have arisen when complaint numbers have risen in a way that has not been planned for. The

point was made by Ombudsman Services that, over the past two years, sudden and

unpredictable fluctuations in volumes have become commonplace and that the peaks in

complaint numbers have led to a failure to meet key performance indicators. 37 This same

point was made in the Sohn review for Ofgem.38

Consumer involvement

All of the schemes survey consumers on their experience of using the external scheme and

the feedback is, in general, positive.

5. Vulnerable consumers

Consumers may be at particular risk of vulnerability because of a wide range of personal

circumstances that can be short-or long term in effect. Many are faced with multiple factorsthat contribute to vulnerability, such as having a sensory impairment and being on a low

income. In addition, the policies and practices of provider organisations can also place

consumers at greater risk of vulnerability, including the ways in which complaints are

handled.

36

. Seehttp://bit.ly/AEhfo4at para 6.537 . Ombudsman Service Annual Report 2011 at 8.38 . Ofgem Independent Review of the Energy Ombudsman (2010).
http://bit.ly/AEhfo4http://bit.ly/AEhfo4http://bit.ly/AEhfo4http://bit.ly/AEhfo4


18/24

18

This broader and multi-dimensional concept of consumer vulnerability is becoming more

commonly accepted. For example, as the BSI standard on Inclusive Service states:

`Consumer vulnerability is relative and dynamic, and a consumers needs and abilities can

change with time or circumstance, especially if the consumer is faced with a particularly

urgent or complex issue.39

There is no need to re-think the basic principles underlying good complaint handling and

redress systems but there is a need to ensure that these systems are operated in ways that

meet the needs of all consumers. The BSI standard highlights the importance of consumer-

facing organisations providing a flexible and inclusive service, which meets the needs of all

consumers regardless of their personal circumstances. It also points out that this can

increase their ability to seek effective resolution with an organisation if things go wrong.40

Although some requirements for providing certain services for people with specific needs

exist (for example, in the energy and water sectors), the evidence shows that much still

needs to be done. For example, Ofwats review of company complaint handling found that

there were several companies which did not make it clear what alternative channels of

communications were available, or that complaints leaflets were available in alternative

formats (for example, large print, Braille).41 Also, forthcoming research in the energy sector

shows that there are serious barriers for many consumers in vulnerable circumstances in

getting advice and information. These include communications systems that do not take

account of people with specific needs (such as those with hearing loss or speech difficulties);

costly telephone contact; and systems that exclude people without internet access.42

39Inclusive service provision Requirements for identifying and responding to consumer vulnerability,BS 18477, 2010.40 Ibid41 Seehttp://www.ofwat.gov.uk/publications/rdletters/ltr_rd0710complaints(accessed 12/08/11) .42

See Too many hurdles: information and advice barriers in the energy market, November 2011,Centre for Consumers and Essential Services, University of Leicester and Eaga Charitable Trusthttp://bit.ly/AaYy8Z
http://www.ofwat.gov.uk/publications/rdletters/ltr_rd0710complaintshttp://www.ofwat.gov.uk/publications/rdletters/ltr_rd0710complaintshttp://www.ofwat.gov.uk/publications/rdletters/ltr_rd0710complaintshttp://bit.ly/AaYy8Zhttp://bit.ly/AaYy8Zhttp://bit.ly/AaYy8Zhttp://www.ofwat.gov.uk/publications/rdletters/ltr_rd0710complaints


19/24

19

As Ofwat has stated:

`The Disability Discrimination Act gives disabled people important rights of access to

everyday services. Service providers have an obligation to make reasonable adjustments to

the way they provide a service. Access to services is not just about physical access, it is

about making services easier to use for everyone. 43

Under current arrangements, there is only specific help with complaints for vulnerable

consumers in the energy sector under the CEAR 2007. In essence, this involves a referral to

Consumer Focuss Extra Help Unit (EHU), commonly from The Citizens Advice Consumer

Service. Consumer Focus customer satisfaction surveys suggest that those who use the

Unit are happy with its performance. However, a significant proportion (just over 40 per cent)

thinks that their suppliers response subsequent to the involvement of the Unit was either

poor or very poor.

One question is whether or not these provisions of CEAR 2007 should be extended to other

sectors such as water, communications and transport. These are all sectors that provide

services that are essential for consumers social and economic inclusion. In many respects,

the services impact on peoples health and well-being. While the threat of disconnection for

domestic supply does not apply in the water sector as it does in energy, problems with bills

and services can create worry and financial loss for consumers. Problems with

telecommunications services may mean that someone in a vulnerable position is unable to

contact services such as medical or social care. There may also be multiple consequences,

for example, if difficulties with communications services make it difficult to sort out problems

with other essential services, such as banking. These difficulties can impact on any

consumer but the consequences are likely to be more serious for those already at risk of

vulnerability.

So there is an argument for expanding the current arrangements provided through the EHU.

However, there is a danger that a two level system is created, and there are also problems

associated with defining which consumers are deemed vulnerable and covered by such

arrangements and which are not. There is also a risk that the urgent issue of improving

mainstream arrangements for complaint handling is not properly addressed.

43 .http://bit.ly/xVVh15
http://bit.ly/xVVh15http://bit.ly/xVVh15http://bit.ly/xVVh15http://bit.ly/xVVh15


20/24

20

Overall, there is evidence that companies need to improve their treatment of consumers who

may be in vulnerable circumstances both generally and in relation to handling complaints.

This includes better training of frontline staff to identify triggers indicating vulnerability so that

consumers can be dealt with appropriately and sensitively, as recommended by Citizens

Advice in its report on `Access for All. 44

It also includes a range of issues from raising

consumer awareness of complaints handling systems; ensuring ease of access and use of

these systems; having information and communications systems that meet peoples specific

needs; through to having accessible websites. Such requirements apply equally to external

redress systems such as Ombudsman services.

6. Looking towards the future

One issue that needs to be considered is to what extent developments in technology and, in

particular, social networking may affect complaint handling. Information about companies

and complaints is now routinely accessible on the internet and e-mail can be used for the

submission of complaints and communication. The question now facing us is whether or not

web based technology can be used to improve complaints handling and the customer

experience by empowering consumers to more effectively speak to companies about their

rights and to speak out when they are not satisfied. We should also ask whether web based

technology can be used to provide consumers with a helping hand and do as much of the

heavy lifting involved in making a complaint as possible.

Sites like ComplaintCommunity 45 provide consumers with a means to make complaint in

public, to discuss their complaint. Like many other sites operating in this area this site is not

well used. Although there is currently a Twitter feed, it does not appear to be very active, for

example, its news page highlights events in 2010. Get Satisfaction describes itself as a

simple way to build an online community which enables conversations between customers

and the companies which will, among other things, deal with complaints.46

Complainandclaim.com

47

provided a system for claiming refunds on tube journeys beforeceasing trading in autumn 2011. The site was a technical success but its lack of funding

appears to have led to its closure.

44 .Access for all The importance of inclusive services, Citizens Advice, 2011.45

.http://www.complaintcommunity.com/46 .http://getsatisfaction.com/47 .http://complainandclaim.com/
http://www.complaintcommunity.com/http://www.complaintcommunity.com/http://www.complaintcommunity.com/http://getsatisfaction.com/http://getsatisfaction.com/http://getsatisfaction.com/http://complainandclaim.com/http://complainandclaim.com/http://complainandclaim.com/http://complainandclaim.com/http://getsatisfaction.com/http://www.complaintcommunity.com/


21/24

21

As well as sites dedicated to making complaints and getting problems sorted consumers

make widespread use of social media to attempt to resolve their problems. These efforts

often focus on using public pressure and reputational damage to embarrass companies into

sorting out problems. The Twitter hashtag #vodafail is in regular use, the website

www.vodafail.comprovides Australian Vodafone customers with updates about service

updates. Significantly Vodafail.com wasnt created by a telecoms regulator but instead by a

disgruntled Vodafone customer.

The forums on Money Saving Expert48

provide another good example of consumers using

public websites, created by an intermediary, to try to resolve their problems. There has also

been a growth in single issue focus groups asking companies to change their corporate

behaviour. Social media provides an excellent way to spread information about how to get

problems solved and experiences about what to say to companies to get them to co-operate

can easily be shared even between perfect strangers.

Complaintandclaim.com illustrated that systems can be produced which make claiming

refunds or compensation easier provided that there are some clear criteria for the refund or

compensation. This approach could be developed into apps for smart phones, as well as

being web-based. There are some limitations to this approach as more complex complaints,

or complaints that require evaluation, may still require human intervention and handling and

some consumer may not feel comfortable dealing with their cases electronically

There is clear commercial and not for profit interest in handling complaints for profit. This can

be seen very clearly in the development of claims management companies which handle

claims in a number of sectors, often in relation to financial services. This is not necessarily

technology driven and it is often a mixed blessing for consumers. Commercial complaint

handling companies will have to make a return and there are a range of possible business

models open to them including: selling advertising on the website, including the use of online behavioural

advertising

selling commercial access to the data sets created by the site

a free service funded by donations (in the fashion of Wikipedia)

providing a complaints handling service to companies as an extension of existing

customer relationship management approaches (the model adopted by

getsatisfaction.com)

48 . forums.moneysavingexpert.com
http://www.vodafail.com/http://www.vodafail.com/http://www.vodafail.com/


22/24

22

taking a percentage of any compensation for the consumer

It is important to avoid getting caught up in the rush to adopt new technologies, for example

FOS has been advised by the young people it consults to keep its social media messages

simple and low-key.49

It is interesting to note that only FOS, of the external redress schemes

mentioned in this paper, has a Facebook site, whereas a number of the Australian

Ombudsman have such sites. Also, the evidence about how customers contact companies

and external redress schemes is that, at the moment, the vast majority of them use the

phone, rather than e-mail or the post. This is not surprising. As regards first tier complaint

handling, most people would find it easier to explain their complaint verbally, rather than in

writing, and are probably hoping that it can be dealt with in the first encounter. Also,

telephone contact gives them the possibility to ask questions and explore options, which is

something that is also available to the company in such an encounter. It is difficult to see

how this part of the process could be replaced by new social media. It does raise an

important question about the cost of calling either the companies services or the external

redress system. This can be a particular issue when the customer is calling from a mobile

phone.

Consumer Focus is currently exploring the potential that new technologies offer in terms of

improving redress pathways for consumers. In particular we are assessing whether an

intermediary service can offer consumers a convenient complaints portal that (i) provides a

straightforward interface into redress pathways; and (ii) captures details of the problems

experienced, which are then filtered by issue and aggregated into instances of common

detriment, in ways that will engage the provider on providing resolution.

7. Recommendations

General

All the regulators discussed in this paper are either under review or are likely to havesignificant changes to their remits. It is important that the progress they have made in terms

of complaint handling and redress is not lost in any transitional period, especially as this is

likely to coincide with new institutional arrangements for consumer protection.

49 . FOSAnnual Review 2010-11.


23/24

23

Complaints data should be reported on a named company basis. This should include

complaints to the company and to the external redress system about the company. Such

data should be given in a raw form and, if desired, in a normalised format, for example,

complaints per 10,000 customers. Where companies self-report complaints data,

consideration should be given to the use of external audit to ensure consistency in how data

is logged and reported. This would ensure proper comparability across companies.

There should be adequate sanctions for non-compliance which are enforced effectively by

the regulators.

Regulators should meet to discuss common issues in complaint handling. A wider regular

meeting/conference including representatives from the external complaint handlers, the

companies, consumer representatives and academics could also have value.

Statistical reporting needs to be improved and done on a consistent basis. This is a

particular problem for the Telecommunications and Energy Ombudsman.

There needs to be further examination of contacts which are outside the jurisdiction of the

external redress schemes and what happens to them.

The Energy and Telecommunications Ombudsman need to be encouraged to pay more

attention to the identification and reporting of systemic issues.

Vulnerable consumers

There is evidence that companies need to improve their treatment of consumers who may

be in vulnerable circumstances both generally and in relation to handling complaints. This

includes better training of frontline staff to identify triggers indicating vulnerability so that

consumers can be dealt with appropriately and sensitively. These requirements applyequally to external redress systems.

Water and sewerage

Ofwat should develop criteria for the approval of a single external redress scheme which all

water only and water and sewerage suppliers should be required to become members.

Ofwat should adopt a model complaints code to which all water only and water and

sewerage suppliers should be required to adhere.


24/24

Passenger transport

The Rail Regulator should develop criteria for the approval of a single external redress

scheme to which all train operating companies should be obliged to become members. This

could either be introduced as a license requirement or as part of a franchise agreement.

The Rail Regulator should adopt a model complaints code, to which all train operating

companies should be required to adhere.

There is an urgent need to develop an effective external redress scheme for buses, tubes

and trams and model complaints procedures.

Telecommunications

There should be only one external redress system in telecommunications. The existence of

two such schemes in one sector is anomalous and confusing to consumers.

Postal services

There needs to be research into how the revised complaints process is handled by Royal

Mail, the consumer experience and why historically so few complaints are reaching

POSTRS.

effective complaint handling a discussion document

Documents