A probe by the financial services regulator into the UK’s largest banks has revealed widespread failings in the way they handle customer complaints.
The Financial Services Authority (FSA) started investigating the five unnamed banks last May, but said that they if they did not undertake agreed improvements in their "unacceptably" poor complaint handling procedures by the end of the year, they would face fines.
Two are being investigated further, however, and may end up with multi-million pound fines anyway.
The FSA said that the five were responsible for more than 70% of all complaints in this area and while it would not confirm which were involved, the largest are Lloyds Banking Group, Royal Bank of Scotland, Santander, HSBC and Barclays.
The regulator blamed low standards on senior managers being insufficiently interested in complaints procedures and on the poor training of frontline staff, who were often not given enough time to deal with gripes effectively.
Dan Waters, the FSA’s director of conduct risk, said: "While we found some good practice, there is clearly evidence of unacceptable standards of complaints handling in banks. Delivering change in this area is a major priority and we are determined to use all the tools available to us to ensure that banks comply with our rules."
The regulator found that four out of five of banks were too slow in dealing with grievances, while 36% of the 600 sample complaints evaluated were poorly or inadequately investigated, especially by staff in branches and call centres.
Some 18% of decisions had been wrong and unfair to customers and where compensation was offered, it was often not sufficient.
The FSA also discovered that correspondence was not up to the mark, with banks failing to tell customers the outcome of their investigation in a way that was “fair, clear and not misleading”.
Three out of five banks misused their two-stage complaints procedure, which delayed resolution of the issue, while three out of five failed to tell customers they could go to the Financial Ombudsman Service if they were still unhappy with their bank’s response.
The cases related to day-to-day activity linked to current accounts, mortgages, insurance and investments. Complaints over payment protection insurance and bank charges are being investigated separately.
The FSA data indicated that about 85,000 people complain about their current accounts each month, 29,000 are unhappy about home or travel insurance, 27,000 about credit cards and 14,500 about car insurance.
As of this August, the regulator will require all high street banks to publish information about the number of complaints they receive.