Financial Ombudsman Service settles record number of disputes against financial firms

More than half a million complaints about financial firms were resolved by the Financial Ombudsman Service last year.

The Financial Ombudsman Service (FOS) received 2.3 million complaints about financial firms last year, equivalent to more than 40,000 a week or 8,000 each working day.

In its annual review of 2013/14, the FOS - an independent body which settles disputes between financial firms and their customers - reported that one in five of the initial enquiries it received turned into a formal dispute.

Overall there were 512,167 new cases lodged against firms up from 508,881 in 2012/13.

The Ombudsman said it settled a record 518,778 disputes - more than double the number last year. Of these 58% were upheld in the customers' favour, up from 49% the previous year.

What we’ve been complaining about

Below is a table outlining the main areas of complaint the FOS deals with and how many cases it recieved last year.

PPI continues to dominate

As you can see payment protection insurance (PPI) continues to dominate complaints to the FOS.

The total number of new cases rose 6% to 399,939, making up over three quarters of all the cases the Ombudsman handled last year.

PPI was sold to borrowers as a safety net which could step in should their circumstances change and they could no longer meet their repayments. But this insurance policy was often mis-sold to people that didn’t qualify for the cover.

In total the FOS has received over one million PPI complaints, two thirds of which were received in the last 18 months. Interestingly the Ombudsman says a high proportion of the PPI complaints are raising issues about the way redress was calculated rather than about the original mis-selling of the policy.

Read How to claim your PPI compensation for information on how to make a complaint yourself for free.

The other big areas of complaint

After PPI, the next biggest area of complaint was banking and credit which accounted for 13% of new cases over 2013/14.

Of these cases nearly 30.5% were related to current accounts, 19.5% to mortgages, 16% to credit cards, 12% to consumer credit products and services, 10% to unsecured loans, 5.5% to savings accounts, 1.5% to secured loans and 5% to other banking services.

When it came to current accounts the Ombudsman said it continued to see a "significant increase" in the number of complaints specifically about packaged accounts. There were a total of 5,667 new cases, up a whopping 248% compared to the year before.

Packaged accounts come with a range of added benefits like mobile phone insurance and breakdown cover which customers have to pay a monthly fee for. However, these accounts have come under scrutiny for not being beneficial to everyone that takes them out. New rules mean banks and building societies have to check if customers are eligible to use the insurance products included in a packaged account before it’s sold. Read Rules tightened on packaged current accounts.

The Ombudsman said that people were complaining because they felt they had been mis-sold a packaged account and there was also a growing number that said their accounts had been ‘upgraded’ without their knowledge or told they had to have a fee-charging account. The Ombudsman said it found in the customer’s favour in these circumstances a high proportion of the time.

Disputed transactions, current account scams, and IT glitches also made up a large proportion of current account complaints.

Insurances excluding PPI, which accounted for 6% of cases last year, covered over 20 different types of policies. The largest area of complaint was related to motor insurance which made up 23%, followed by buildings insurance at 13%, term assurance at 11%, travel insurance at 7% and contents insurance at 6%.

Motor insurance continued to dominate with a total of 7,190 cases. Overall the number of complaints around this product has dropped compared to the previous year, but the FOS said the problems customers had were still around the same recurring issues of delays and poor communication when making a claim.

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How the complaints break down

Below is the full breakdown of the financial products that attracted complaints last year along with how these numbers have changed annually.

Many areas saw an overall drop in complaints, which the FOS put down to many companies acting to rectify certain recurring issues customers were having. However, some specific products saw rises. Consumer credit products and services for example saw an overall drop of 10% in complaints, but payday loans, which falls into this category, saw complaints rise 46% from 542 to 794 cases.

Card protection policies (CPP) feature in the financial products breakdown for the first time as over a thousand complaints were received last year. This is probably because more information regarding the mis-selling of this policy and the redress came to light.

Many of the customers that complained about CPP said they wouldn’t have taken out a policy to protect their cards against fraud if they had known about the free automatic legal protection they were entitled to. Read CPP card insurance mis-selling: how to claim compensation.

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How to complain to the FOS

If you have a complaint against a financial firm you will first need to take it directly to the company in question before you can get the Ombudsman involved.

Read: How to complain to the Financial Ombudsman Service for more information on what you need to do and when.

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