TCF's core objective is to improve consumer understanding of financial services. Head of the initiative, Nausicaa Delfas, tells Peter Carvill about her hopes to see a fully integrated agenda within firms
Since the vast majority of COVER's interviews take place at the magazine's head office, it is a refreshing change to be sitting in a Financial Services Authority (FSA) boardroom that overlooks Canary Wharf as Nausicaa Delfas, the body's head of Treating Customers Fairly (TCF), outlines the new regulations' core principles.
"The key issues in relation to protection and health insurance," she explains, "are that customers are really clear about what they have bought; they understand what the exclusions are; that the information is clear, fair and not misleading; and that they can make a complaint without suffering unreasonable barriers.
"Basically, a lot of it comes down to whether customers get what they thought they were getting through the sales process. When I was working in financial promotions, the questions we often posed were, 'Does it really do what it says on the tin? Is the project as it is represented or are the benefits so accentuated that customers don't know there are quite significant downsides?' So TCF is about meeting the expectations that firms set."
Delfas' route to heading the TCF department began more than 15 years ago when she joined Freshfields as a trainee lawyer. Delfas stayed at the firm for the best part of a decade, seeing it through a series of mergers in 2000 to become Freshfields Bruckhaus Deringer: "I started my training contract in 1992 but I qualified in 1994. It's a major city law firm that advised major corporations. I was there for seven years, and later on I worked as a lawyer in the enforcement division at the FSA as well. At Freshfields, I specialised in litigation with financial services and competition law."
It was here she became more involved in financial services law, a development which led to her taking a role with the FSA: "I was involved in Lloyd's central fund litigation in the mid-90s and I became more involved in competition and financial services law. I became interested in making the move from private practise, and the FSA really appealed to me because of the unique insight it offers to the financial services industry."
In discussing the ongoing reception of TCF, it seems this insight is paying dividends as Delfas claims the industry's effort to comply so far has been 'excellent'. But she adds, there is still room for improvement: "We do think, overall, there is further to go and that is what we have been working on for the last couple of years by setting the consumer outcomes, laying out the product life-cycle, designating the culture framework that helps firms think about how their behaviour can hinder or help TCF, and providing other advice in a distributor guide."
But Delfas' feelings about attitudes regarding the uptake of TCF are largely affirmative: "I spoke at the COVER conference last November, and I must say that I felt there was a great deal of engagement there which was positive."
She joined the FSA in 2000: "I qualified and did litigation at Freshfields so it was a natural stepping stone for me to come to the FSA and work in the enforcement division. I originally came as a manager and did retail and wholesale investigations."
It may seem, that in making a manager of the enforcement division its head of TCF, the FSA is seeking to wield a big stick when it comes to recalcitrant firms that do not meet the new guidelines. However, Delfas is quick to point out that the FSA is focused on aiding and guiding firms through the implementation of TCF: "If firms do not have adequate management information and if they could cause actual detriment to consumers, the FSA will obviously take action but we are very serious about helping firms get to the deadlines by the end of December. But we will take action if we find out there are firms who are doing this," she says.
In taking on TCF, Delfas believes the cross-industry benefit could be immense. At a time when consumer confidence in the protection industry seems to be at an all-time low, this could be an impetus to boosting sales: "It is important that people understand the commitment and energy that come from everyone in the industry doing this together and, with that collective effort, putting the industry in a better place in terms of reputation and in increasing consumer confidence so I very much hope firms will take the challenge and progress."
There will be a variety of tools the FSA can use instead of imposing fines meaning enforcement action is just one measure it can take: "We can vary a firm's permission which means they may not be able to sell in a certain area of business, we can appoint a skilled person to do a review of the firm and, through our usual supervisory process for relationship managed firms, we can set tough risk mitigation programmes. So there are a number of things we can do which aren't direct enforcement actions."
The final step before becoming head of TCF was more of a segue. Moving on from the enforcement division, Delfas set up the financial promotions and unfair terms in the consumer contract regulations department, which she then led for three years. In 2006, TCF was incorporated into this department.
One of the major points of TCF is that the regulation is not set in stone but is rather principles-based meaning that firms have to be able to demonstrate they are meeting six outcomes set by the FSA when they are dealing with customers. A criticism of this approach has been that the set-up may be too open to interpretation from both the FSA and providers. Delfas does not see principles-based regulation as an issue: "Is it open to interpretation? Well, quite a lot in law and rules is open to interpretation. The question is whether firms are able to demonstrate whether they have achieved an outcome, and take it from there."
Delfas is aware there will be challenges in implementing TCF. One of those, she believes, will be not only getting firms to change their behaviour but in making sure this change is echoed throughout their company: "What we're seeing are firms seeking to make headway but not integrating it into their business. What we're interested in is what has changed as a result of TCF, what focus does the leadership have on it, if there's proper management, clear strategies within firms and whether staff are motivated and rewarded for TCF.
"It's interesting that some firms have a TCF project and are giving the sense of a good deal of activity going on in that direction but we want to see if that has changed the core of their business. TCF is not an add-on but must be integral. That's the biggest challenge, and that change of culture takes time."
When pressed about future plans, Delfas says her department is considering a number of options, one of which is how TCF could be communicated to the one group of people it was ostensibly set up to benefit - the consumer. As a starting point, the FSA launched its Money Made Clear website which it claims has received over three million hits within a year, a figure that works out to roughly 8,500 visits a day.
"We are looking at consumer communications," she says, "and we will be discussing it with our consultative group formed of trade and consumer bodies."
The focus for this year, though, will remain on the delivery and implementation of TCF across the entire financial services industry: "Our focus is on delivering TCF through firms of all sizes, and we hope the industry appreciates the benefits it will achieve through doing this through the benefit to its reputation and the increase in consumer confidence. The core issues are thinking about what outcomes are relevant to your business, whether you have evidence that shows you are delivering them and, if not, taking action to rectify that."
CV: Nausicaa Delfas
2006 - to date: Head of TCF at the FSA
2004 - 007: Head of financial promotions and unfair terms in the consumer contract regulations department at the FSA
2000 - 2004: Manager of enforcement division at the FSA
1992 - 2000: Lawyer at Freshfields.
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