30 May 2002
I write to draw your attention to the rapid rise in customer complaints against AIs received by the HKMA in recent months, and a number of suggested measures to address this issue.
In the first quarter of 2002, the HKMA received a total of 479 complaints against institutions, compared with 176 in the same period last year. Of these complaints, 250 were related to debt collection, and 229 were general complaints (compared with 93 and 83 respectively for the first quarter of last year). In fact, the total number of complaints in Q1/2002 alone is already over 50% of last year's total of 880 complaints. This rate of growth is unprecedented. Based on the current growth rate, the projected number of complaints for this year is likely to reach over 2000 cases.
A certain number of complaints is a healthy phenomenon. Moreover, relative to the number of accounts, the amount of complaints is not excessive. However, rapid growth in the number of complaints is a cause for concern. First, it could indicate that the quality of customer service is deteriorating or at least not keeping pace with customer expectations. Second, the handling of customer complaints is posing an increased administrative burden on all concerned (including the complainants themselves who have to go to the trouble of lodging complaints).
In view of this, the HKMA believes that AIs should give increased priority to ensuring, so far as they can, that complaints do not arise in the first place. And, to the extent that complaints do arise, they should ensure that the complaints are dealt with in a fair, thorough and prompt manner that is consistent with the requirements of the HKMA's Guideline on Complaint Handling Procedures.
The HKMA would like to draw institutions' attention to some of the important lessons learned from its recent handling of complaint cases -
The increase in the number of complaints is to a large extent related to allegations of misconduct by debt collection agents (DCAs). We have already taken the matter up with the Code of Banking Practice Committee as an industry issue. Consequently, the industry Associations have issued a circular to all member institutions reminding them to step up monitoring of the performance of the DCAs they employ and ensure full compliance with all relevant provisions in the Code of Banking Practice. The HKMA fully endorses the industry Associations' advice given in their circular.
In addition to the general advice given by the Associations, the HKMA would like to draw institutions' attention to the following based on our recent handling of cases involving debt collection action taken against innocent third parties.
In view of the rise in allegations of unscrupulous debt collection tactics, the HKMA has decided to reinforce its supervisory oversight of AIs' debt collection activities. All institutions will be required to submit a quarterly report (see Annex) on complaints received against the DCAs they use. The report should cover the number and nature of complaints received in relation to each of the DCAs engaged by the AI and what actions the institution will take in relation to those DCAs which attract frequent complaints. The report should be submitted to the HKMA within 2 weeks of the end of each quarter. The first such report, covering the second quarter of 2002, should be submitted to the HKMA by 15 July 2002. The soft copy of the reporting template will be emailed to your institution shortly. Should you have any questions on the report, please contact Ms Jocelyn Chan at 2878-1275.
D T R Carse
Deputy Chief Executive
1. Section 37.12 of the Code of Banking Practice provides that institutions should consider whether to terminate the relationship with a debt collection agency if they are aware of unacceptable practices of that agency or breaches of its contractual undertakings.