Treat Customers Fairly

"Treat Customers Fairly" (TCF) is a regulatory slagon used by FSA in the UK. As a high level principle, TCF standards have extensively been enforced by FSA to protect retail customers throughout the product life-cycle, i.e.

• product design & governance
• identifying target markets
• marketing & promoting the product
• sales & advice processes
• after-sales information
• complaint handling

Sometimes retail customers are protected from mis-selling of not only investment products, but also other financial products (e.g. insurance). A recent case illustrated how FSA was taking care of the citizens.

Last week FSA fined Carphone Warehouse Ltd £245,000 for not treating its telesales insurance customers fairly. Carphone's primary business is the sale of mobile phones and airtime contracts through its branches, telesales and the internet. It also offers a range of insurance policies covering the theft of and accidental damage to moblie phones (I can't imagine such kind of insurance would prevail in HK).

From Jan to Oct 2005, Carphone breached FSA's Principles by failing to sending 118,000 customers who had bought mobile phone insurance through its telesales a Statement of Demands & Needs (SDN). The SDN is viewed as an important document to make customers aware that the insurance was unnecessary or inappropriate for their particular circumstances (so that they can cancel the policy within the cooling-off period). But Carphone continued to sell insurance via its telesales (on an advised basis) when it knew it was not complying with the SDN requirement.

FSA also challenged Carphone's failure to resource its compliance function in proportion to risks posed by the complex multi-channel distribution model.

TCF is a vague concept. In the past, "not cheating customers" is our business ethics, now treating them fairly may become the bottom line. But what is "fairly"? I would say the degree of fair treatment should be relative to the civilization of retail customers. Won't you expect the shopkeeper issues a SDN when selling a plasma TV to you?