Author: Priscilla Gaudoin - Head of Risk & Compliance - published May 2025
Topics: Complaints, Data, Recordkeeping
Regions and Regulators: Global, FCA, FOS, ESMA, ASIC, CRPB
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Consumers today expect much more from financial services firms than just a basic transactional efficiency.
Across global markets, expectations are increasingly shaped by evolving digital experiences, rising regulatory standards, and growing awareness of consumer rights.
How are regulators and firms reshaping complaints handling in the face of rising consumer expectations?
From the UK and the EU to Australia and the USA, financial regulators are tightening oversight of how firms handle customer complaints. Key concerns include slow response times, unfair resolutions, and systemic misconduct in areas such as lending and insurance.
Global Regulatory Trends:
In the UK, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) are reforming the complaints system, partly due to the rise in mis-selling claims, particularly in car finance. Proposed reforms include extending response times for firms and limiting appeals against ombudsman decision as well as avoiding mass compensation events that disrupt the financial sector.
Additionally, since the introduction of the Consumer Duty in 2023, firms are expected to prioritise customer outcomes, however the FOS has reported an increase in complaints, particularly around irresponsible lending and credit cards. A key concern is firms lending to vulnerable customers, such as those with gambling problems.
In the EU, the regulators are increasingly focusing on harmonisation of complaints handling across member states. Guidelines on complaints handling issued by the Joint Committee of the European Supervisory Authorities (EBA, EIOPA & ESMA) represent requirements for, and ensure a consistent approach to complaints-handling across the banking, investment and insurance sectors. This aims to ensure that customers benefit from a standard approach regarding of the type of product bought regardless of where in the EU they purchased it.
Australia:
Meanwhile in the southern hemisphere, the Australian Financial Complaints Authority (AFCA) has been receiving an increasing number of complaints about financial institutions failing to comply with responsible lending laws. The Australian Securities and Investments Commission (ASIC) has been closely monitoring firms, especially in the buy now, pay later (BNPL) and insurance sectors. There is also a push to limit dispute resolution delays, with penalties for those firms taking too long to resolve complaints.
USA:
We also see the US supervisory bodies with heightened focus on complaints handling. The Consumer Financial Protection Bureau (CFPB) has flagged concerns about financial institutions using arbitration clauses to limit consumers’ ability to escalate complaints.
Major banks have faced lawsuits over unfair fees, mortgage mismanagement, and slow redress for fraudulent transactions. Complaints in the cryptocurrency services have also risen significantly, with customers struggling to recover lost funds after scams or platform failures.
Where are the Gaps?
Key weaknesses in complaints management processes can be summarised as follows:
- Delays in Complaints Resolution:
- In the UK 43% of complaints are resolved within three days, that’s down from 46% last year. Complaints taking over eight weeks have increased to nearly 7% which is concerning for the regulators (source: FCA latest report)
- Additionally, in sectors such as pensions, the complexity of the product has led to low resolution rates (only 20% resolved within three days)
- Irresponsible Lending:
- The UK’s FOS has flagged a significant rise in complaints about firms lending irresponsibly, such as issuing credit to consumers with known gambling issues
- High cost car finance and discretionary commission arrangements (DCAs) in motor finance have led to a flood of complaints, with many cases currently on holding pending Supreme Court decisions.
- Unclear Communications and Poor Documentation:
- Insurance firms, particularly in motor insurance and total loss valuations have been criticised for unclear policy terms and lack of transparency in pricing
- Many firms fail to clearly explain why complaints were rejected, leading to more
- Failure to Adapt to Consumer Duty:
- Firms are still struggling to align with the Consumer Duty requirements, particularly in ensuring fair value and positive customer outcomes
- Some financial products still lack transparency, leading to higher uphold rates for complaints
Room for Improvement:
Firms can improve their complaints handling processes in several ways:
- Invest in complaint resolutions teams and AI
- Firms are using AI to triage complaints, reducing resolution times by prioritising urgent issues
- More financial institutions are training staff to handle complaints empathetically and proactively identify customer vulnerability
- Enhance transparency and customer communication
- Proactive customer engagement by updating customs on complaint progress. This reduces escalations to the ombudsman services
- Clearer communication and explanation about pricing, fees and rejection reasons help prevent regulatory scrutiny.
- Improve data tracking and compliance monitoring
- Firms that analyse complaints data to identify recurring issues (eg unfair lendig) are less likely to face regulatory action
- Regular internal audits ensure firms comply with consumer duty and gair treatment expectations
- Faster resolution strategies
- The banking sector has improved, resolving 46% of complaints within three days, but motor finance and complex investment products still struggle
- Reducing uphold rates (from 60% to 54%) indicates better complaint investigations and resolutions
Figure 1: Complaints handling improvements
In summary, regulatory firms are under increasing pressure to resolve complaints faster, improve transparency, and treat customers fairly. The Consumer Duty in the UK, ASIC’s scrutiny in Australia and CFPB’s stance on arbitration in the USA are pushing firms to strengthen their complaints handling frameworks.
How Ruleguard Helps:
The Ruleguard Complaints Management Solution is a dedicated software solution for raising and managing complaints. The solution allows firms to:
- Raise a complaint
- Enter details such as investigation, reporting and resolution dates along with a full description of each item
- Specify where a rule has been broken, if necessary specify a rule breach has occurred
- Document root cause analysis and remediation actions
- Produce progress reports
Ruleguard's powerful rules-mapping system allows firms to link issues directly to the relevant regulation. It is also possible to link risks, controls, and business processes.
If you’d like to learn more about Ruleguard's Complaints Management Solution please contact us for further information on: Tel: 0800 408 3845 or hello@ruleguard.com.
Related Webinars, White Papers and Blogs
Ruleguard hosts regular events on various regulatory topics. You can watch our webinars on-demand at your convenience, or read our blogs, white papers, infographics, and tune in to our podcasts.
Blogs:
- Complaints: Is your data telling you something?
- How effective governance aids complaints handling
- Navigating the AI frontier: A regulatory journey
Webinars:
- Improve complaints management and improve compliance
- Understand the impact and implementation of the UK's Consumer Duty
- Beyond the checklist: Unveiling the true essence of Consumer Duty
White papers:
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About the author
In a career spanning 30 years, Priscilla has worked as a consultant, CCO and MLRO providing regulatory oversight and advice to firms across the financial services industry. She is responsible for our thought leadership programme, writing regular articles and white papers, and hosting webinars on a variety of regulatory matters.
She is a Fellow of the International Compliance Association, a certified GRC practitioner, and a member of the Institute of Risk Management.
