Complaints against financial firms almost doubled last year, to the point that the Financial Ombudsman Service received 7,000 new complaints a day!
The Financial Ombudsman Service received more than two million complaints about financial firms last year, the equivalent of more than 7,000 a day.
In its annual review of 2012/13, the Ombudsman – an independent body which settles disputes between financial firms and their customers – revealed it had tackled more than 508,000 new cases across the year. That’s an increase of 92% from 2011/12.
So what’s behind this massive rise? And who is attracting the most complaints?
The PPI saga continues
Payment Protection Insurance (PPI) continues to dominate complaints against financial firms. The total number of cases rose to almost 379,000, more than double that of the previous year. It accounts for three quarters of all of the cases the Ombudsman handles.
PPI was insurance sold to borrowers to help them pay off loans if their circumstances changed and they could no longer meet their repayments. The trouble is, the insurance was horrendously overpriced and sold to people who didn’t actually qualify for the cover.
As most of us know, this scandal has created an opportunity for claims management firms, who offer to manage the complaint on our behalf in exchange for a chunk of any eventual compensation. The only phone calls I ever get on my landline are from PPI claims management firms.
As a result, 45% of all of the cases dealt with by the Ombudsman come from claims management firms.
However, using a claims management firm doesn’t actually improve your chances of getting compensation. As the Ombudsman says in its report: “There is a need for firmer regulation of claims management companies at the ‘cowboy’ end of the industry… [Complainers] have an equal chance of ‘winning’ by bringing their complaint to us themselves for free.”
Read How to claim your PPI compensation and The most successful PPI complaints for information on how to make a complaint yourself.
Other things we’ve been complaining about
After PPI, the next biggest area of complaint is banking and credit, which accounts for 15% of all new cases.
Of these, a quarter of complaints are about credit cards. The Ombudsman said it saw a “significant number” of complaints involving Section 75 of the Consumer Credit Act, which means card providers are equally liable with retailers if something goes wrong with a purchase, such as misrepresentation. Read How Section 75 can protect you for more on how this regulation works.
The Ombudsman stated that too often credit card providers’ defences against being liable were “poorly thought through”.
A further quarter of complaints were about current accounts. Complaints included overdraft facilities being removed unexpectedly, difficulties in cancelling payments that customers thought they wouldn’t have enough money to cover and banks not being flexible in agreeing overdraft repayment arrangements.
Here’s a full breakdown of the numbers of complaints different areas of finance are attracting:
|
Area |
New cases in 2012/13 |
Annual change |
|
PPI |
378,699 |
+140% |
|
Credit cards |
19,634 |
+2% |
|
Current accounts |
19,560 |
+34% |
|
Mortgages |
11,920 |
+25% |
|
Unsecured loans |
7,809 |
+25% |
|
Motor insurance |
7,785 |
+7% |
|
General insurance |
6,330 |
+15% |
|
Savings accounts |
4,967 |
+16% |
|
Mortgage endowments |
4,657 |
+43% |
|
Buildings insurance |
4,611 |
+1% |
Problems with packaged current accounts
A total of 1,629 complaints were made about fee-charging packaged current accounts, described by the Ombudsman as a “very substantial increase” on previous years.
In the past, most complaints about packaged accounts have centred on whether customers were given the account without the option of a free account or their existing free account was upgraded without their consent. However, this year a large proportion of the complaints were because account-holders felt the insurance portions of the package had been mis-sold.
This year financial regulator the Financial Conduct Authority has imposed new rules for the sale of packaged accounts, following an investigation after mis-selling fears were raised.
The success of complaints
One in four of the initial enquiries received by the Ombudsman progressed to become a formal dispute. That’s a jump from one in five across the previous two years.
The Ombudsman upheld 49% of the complaints it settled. That’s down from 64% the previous year, though the success rates vary significantly by area. For example, 65% of PPI complaints were upheld, compared to 25% of mortgage endowment complaints.
In 22% of the cases it upheld it told the business to compensate the complainant for distress and inconvenience. In general, these figures were between £150 and £500. However, in 22.5% of compensation cases the firm was instructed to pay between £1,000 and £25,000.
It calculated that 3% of the cases it settled across the year were frivolous, up from 2.5% previously.
How to complain
If you have a complaint against a financial firm, you’ll need to complain directly before you can involve the Ombudsman. Read How to complain to the Financial Ombudsman Service for more information on what you need to do when.