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The Dubai Financial Services Authority (DFSA) has published its latest thematic review of complaints handling among firms within the Dubai International Financial Centre (DIFC).
The review found that many are using dubious methods to hide the number of complaints they have received about their products and services.
A “high number” of firms reported receiving no complaints at all, while those that reported receiving complaints generally received only a “low volume”.
However, the review identified “significant issues” with the accuracy of the figures being reported on complaints.
Worse still, many of these issues appear to be driven by a deliberate attempt by firms to conceal the real number of complaints they are receiving.
The DFSA identified various methods that firms are using to achieve this. For example, a “substantial” number of firms did not consider issues that were resolved immediately as complaints, so did not record them.
Similarly, firms had employed inconsistent definitions of a “complaint”, so that some genuine complaints were not recorded.
One firm that was singled out in the review had categorised genuine complaints as “operational issues” to avoid having to record them.
Finally, a “small” number of firms did not recognise a complaint if it was not in writing (for example, if it was expressed orally over the phone), while other firms did not recognise a complaint unless the client explicitly stated that they were complaining.
Key considerations
Given the issues identified during the review, the DFSA said that the complaints figures provided by firms are likely to be a “significant underrepresentation” of the number of clients expressing dissatisfaction.
Indeed, many firms told the DFSA that, had they recorded all expressions of dissatisfaction made by clients as complaints, their own reported figures would have been a lot higher.
In its write-up of the review, the DFSA took the opportunity to remind firms of their obligations on complaints handling, resolution and recordkeeping.
These obligations, which are outlined in Chapter 9 of the General Module (GEN) of the DFSA Rulebook, include a standard definition of a “complaint” that firms are expected to employ: “Any oral or written expression of dissatisfaction from a client to an authorised firm in connection with the provision of, or failure to provide, a financial service to the client.”
Certain practices identified by the DFSA, such as not recording oral complaints as complaints, are clearly in violation of the provisions of Chapter 9.
Moreover, Chapter 9 also stipulates that firms should record each complaint that they receive and records must be kept for a minimum of six years from the date of receipt.
Unlike other provisions in the GEN Module, violations of Chapter 9 do not incur penalty fees.
This may explain why so many firms are currently prepared to cut corners on Chapter 9, and were willing to admit to their questionable practices during the review.
However, the DFSA is taking note of firms that demonstrate “good practice” in complaints handling and resolution, particularly those that exceed their obligations under Chapter 9.
It is also expecting the volume of reported complaints to increase in subsequent reviews, now that its concerns have been shared with firms.
Why should you care?
The DFSA clearly sees complaints handling not only as a problem-solving mechanism for individual customers, but also as a means to improve the overall quality of financial services in Dubai.
The regulator praised firms that receive complaints in a “positive manner” and use them as an “opportunity to improve their service offering”.
At the other end of the scale, it will likely be closely monitoring the complaints handling practices of organisations that have been engaging in practices that violate the terms of Chapter 9.
Although mishandling of complaints may not currently incur penalty fees, that could change.
If the DFSA sees little to no improvement in subsequent reviews, it may seek a stronger enforcement mechanism to force firms to change their behaviour.
Firms operating in the DIFC should, therefore, pay close attention to announcements from the regulator and ensure that their practices are aligned with expectations.
They should be proactive in improving their complaints handling, resolution and recordkeeping, and continue to be open and transparent with the DFSA.
