A testing time for TCF

Back in July 2006, the FSA gave notice to the industry that all firms were expected to have reached at least the "implementation stage" of their Treating Customers Fairly (TCF) work by 31 March

With this deadline days away, firms should by now, be making or more importantly have made, significant progress in ensuring TCF forms an integral part of their business culture.

In April, the FSA has committed to a sample of 700 firms, in order to check the progress of TCF. In its recent background paper Assessing Progress it states that "… a firm is at the implementing stage when it is developing plans and processes, allocating TCF resources and responsibilities, and creating capability among its staff".

So what must you do? When approaching TCF, it is important for firms to consider where the FSA is coming from in adopting principles rather than detailed rules. Granted, interpreting TCF is arguably something of a subjective exercise and there is probably a degree of uncertainty as a result.

However, by placing the customer at the heart of a principles based approach, the FSA is inviting firms to define what TCF means to them and how it should apply within their businesses.

This at least affords senior management some flexibility to assess their own organisations, the FSA's objectives and establish a workable interpretation which fits their own model. The alternative, in short, is more detailed rules.

In a word, firms need to 'think'. During the past couple of months, the FSA has backed up its TCF statements with clear action and recently , several further cases of enforcement have been announced, hitting firms such GE Capital Bank and Capital One. Smaller firms such as the Cathedral Motor Company have also been affected.

Major issues
As D-Day approaches, it is crucial that those firms still considering their position on TCF, should at least give thought to some major issues:

• Provide clear definition and statement on what TCF means to them

• How it will apply within their organisation

• Show that they are taking into account the impact their decisions and (in)action will have on the end customer.

Senior management must lead the drive for TCF and all staff must be fully engaged in embracing TCF. Allocating someone the specific responsibility for driving TCF activity can also help create focus. Firms can benchmark their progress by visiting the TCF section of the FSA website. In particular, small firms should refer to the TCF self assessment tool.

Staff understanding
It is also crucial to regularly review sales processes, products and what checks are in place to ensure customers understand the product they have bought.

While senior management may have a good understanding of TCF, it does not necessarily follow that information is filtering through to front-line staff. And it is equally a major consideration that checks on staff understanding are carried out promoting TCF across all key relationships, including partnerships.

Ultimately, it falls to senior man-agement to lead TCF initiatives within firms

Being able to 'prove' a commit-ment to TCF is vital. As far as the FSA is concerned, firms need to be able to back up what they believe they are doing to ensure implementation of TCF with actual evidence.

Firms also need to demonstrate that their actions are benefiting customers. Key documentation, including effective sales record keeping and minutes of key meetings, can certainly help.

Many firms have found their own approach when it comes to proving their action on TCF. However, pivotal themes emerging from the strongest leaders on TCF reveal the importance of management information, utilisation of complaints as a key customer touchstone and a recognition that there is a difference between 'satisfaction' and 'fairness'.

With regard to the latter, mystery shopping and customer satisfaction surveys are not enough as these do not demonstrate that the customer has both understood the product they have purchased and that it was suitable for their needs.

Above all else, the key message to management is that if they identify or become aware of an issue then they must take action to resolve it. Management must also focus on ensuring that customers benefit as a result.

The FSA's implementation stage for action on TCF, by 31 March, is the third of four TCF adoption stages highlighted by the regulator.

Awareness and strategy/planning are expected to be followed by implementation, then embedding of TCF within the firm's culture.

The FSA continues to remind firms that TCF should be viewed as a continuous process and not one that can be simply implemented, then forgotten.

The imminent FSA publication on the provider/distributor relationship is also likely to add to the debate.

All told, the nature of fairness and customer focus is arguably a never ending journey.

Treating Customers Fairly is here to stay. Embraced properly, TCF represents both quality business practice and good news for customers. IT

Neil Taylor is general manager, corporate affairs at Cardif Pinnacle