Increasing lack of trust in financial institutions has led to a 92% increase in complaints being brought to the Financial Ombudsman’s Service (FOS) over the last year, figures show. The record number of complaints is prompting the FOS to consider taking on 1,000 more staff to deal with the extra complaints- with most banks having already taken on more staff to deal with such complaints.
The Financial Ombudsman’s Service is a free service for customers to bring complaints against banks or other financial institutions to. It has the legal power to deal with issues between banks and customers, with its remit covering most financial services, ranging from mortgages, most insurance types, to payday loans, and more.
Over the last year, the FOS annual report showed that more than two million initial queries and complaints were received, a record for the FOS. As a result, 508,881 new cases were opened, with PPI mis-selling accounting for 74% of new complaints.
PPI complaints received by the FOS rose to 378,699, more than double the number received over 2011-2. Often resolved by the banks with no need for FOS intervention, some claims are disputed, ending up being taken before the FOS. PPI cases brought by claims management companies (CMCs) fell by 12%, as consumers realised that they could bring a PPI complaint against a bank themselves, without needing to use a CMC.
All other non- PPI related insurance complaints also rose significantly, by 20%. The insurance sector saw an 85% rise in private medical insurance complaints- and pet insurance issues rose by 50%.
Complaints concerning current accounts rose to 19,560, a 34% rise, with mortgage based complaints seeing a 25% increase to 11,920. Investment based complaints saw a 42% rise to 4,697, with mortgage endowments seeing a similar 43% rise in complaints to 4,657. There were 4,401 new pension related complaints, a 27% rise, with another marked increase seen in complaints concerning loans, which saw a 25% rise to 7,809.
One in four initial enquires ended up as formal complaints where the FOS took action, up from one in five in previous years. The UK’s largest four banking groups accounted for 62% of complaints last year, a 10% increase from figures over 2011-2. Nearly 50% of cases investigated resulting in compensation being paid out. The FOS suggests that this might be due to institutions being under financial pressures themselves, and so wanting to delay most payouts.
The FOS ascribes such a rise in complaints to factors such as a greater awareness of consumer rights, a greater willingness to lodge a formal complaint, and, above all, a lack of trust in financial institutions following many high profile banking scandals (after the PPI and the Libor scandal broke, for example, the FOS saw a marked spike in complaints).
According to Natalie Ceeney, chief financial ombudsman, the figures show “a much stronger consumer voice in the last year, with people becoming more aware of their rights and less willing to put up with poor customer service.” She also noted that as levels of confidence in financial services erode, “Too many financial businesses still seem unable to sort out problems themselves without the ombudsman having to get involved.”
Calling for tougher action from the Financial Conduct Authority, and a change in the banking culture, consumer group Which? executive director Richard Lloyd said that the rise in complaints showed that “banks are still letting their customers down and failing to help consumers with legitimate claims get the compensation they are rightly owed.”
