Complaints and compensation for financial problems are both soaring. However, this approach is far more satisfying than just complaining.
The staff of the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS) must be working their socks off, if their annual reports are anything to go by.
Earlier this week, the FOS, which settles disputes between financial services firms and their customers, released its annual review. In the twelve months to March 2006, the FOS resolved a total of 119,000 disputes (almost 10,000 complaints per month), which is an increase of a third on its caseload for the previous year.
Of these complaints, almost three in five (58%), a total of 69,000, related to claims for mortgage endowment mis-selling, although this figure is declining and is expected to continue to fall. A further 14,000 complaints related to insurance policies, with a big surge in claims regarding the dreaded payment protection insurance.
Alas, over one in seven complaints (15%) made to the Financial Ombudsman Service took more than a year to sort out. Furthermore, the majority (that is, more than half) of all consumer complaints to the FOS failed. In the main, this was because they did not fall within the jurisdiction of the FOS, for example, they were submitted too late, or because the FOS decided that firms had not treated customers unfairly.
Elsewhere, the Financial Services Compensation Scheme was equally busy, with its workload almost tripling from 9,220 complaints in 2004/05 to 26,000 in 2005/06. The FSCS compensates investors who are unable to complain to the FOS about financial firms because these companies have gone bust.
Again, this steep rise was due to a higher level of compensation claims for mis-sold mortgage endowments, which accounted for 20,100 cases. Overall, close to half (46%) of these claims led to compensation being paid to consumers, with the average award amounting to £2,000. In total, the FSCS paid £201 million to consumers in its latest year, compared to £174 million in the previous year.
Clearly, consumers should be grateful for the existence of the FOS and FSCS, both of which are working hard to ensure that consumers with complaints about financial products get a fair hearing and, where appropriate, suitable compensation. However, I have an even more satisfying approach than just complaining, which can be summarised as: "Once bitten, twice shy."
In other words, once a financial firm has let me down, it rarely, if ever, gets a second chance. Indeed, I'm a great believer in voting with my feet: I get my own back on second-rate providers by jumping ship to a better product or provider, which I call the "ditch and switch" approach. In fact, this method works wonders, not least because when I'm cheesed off, I carefully shop around to find suitable Best Buy replacements for soon-to-be-abandoned products!
Thus, if you're fed up with poor service or inferior deals from a financial firm, why not join me in looking around for the best replacements? Thanks to the Fool, it's a doddle to find tip-top bank accounts, credit cards, insurance, mortgages, personal loans and savings accounts. Happy shopping!