Financial Ombudsman reveals extent of complaints

Failures to comply with banking regulations have contributed to a tally of over two million complaints to the Financial Ombudsman in 2013-14, the office’s official report has said.

The tally of 2,357,374 initial enquiries amounted to about 8,000 on each working day, with 512,167 formal disputes arising – a new record for a 12-month period. The principal reason for this was a spate of new claims arising from allegedly mis-sold payment protection insurance (PPI) on loans and credit cards. These made up 78 per cent of new cases, or 399,939 in all – six per cent more than in 2012-13.

Other common causes for complaint related to packaged accounts – where fees are paid by customers for extra services such as free overdrafts, travel insurance and discounts on a range of goods and services. These were up by 47 per cent.

However, while complaints were at record levels, financial institutions did improve in some areas, such as credit cards, for which complaints dipped 47 per cent.

Overall, 518,778 cases were resolved, leading to customers who complained receiving compensation in 58 per cent of instances. Most of these were settled by adjudicators by means such as mediation and recommended settlements, but over 31,000 had to go to a final decision by ombudsmen. Forty four per cent of complaints that did not involve PPI were resolved within three months.

The report highlighted that some institutions were much more culpable than others, with four banking groups being responsible for 63 per cent of cases, while 4,504 firms with the best records accounted for only three per cent of the total.

While this may be accounted for by the fact that larger banks will have a greater volume of business, far more customers and therefore – by the law of averages – be likely to incur more complaints, those who have received many complaints may still consider the need to review their own performance, not least in areas where failures to comply with regulations means complaints are certain to lead to rulings going against them.  

Banks were the subject of 79 per cent of complaints, up from 76 per cent in 2012-13. However, this was mainly due to PPI issues, for which they accounted for 87 per cent. Once PPI complaints were excluded, just 14 per cent of cases involved banks, whereas 58 per cent were associated with general insurers.  

The PPI issue has been dealt with by some banks by ceasing to offer the product, or changing the way it is offered to customers.

One way of doing this has been to stop offering the product as an element of the full embedded cost of a product such as a loan. In such circumstances a customer applying through means such as a phone call – where they would not have sight of the comparative costs for a product with or without PPI – could be sold a product with PPI without being made fully aware that they had the option of taking it without the protection at a lower cost.

Alternative means of selling protection would include sending a form with the product documents offering the product and detailing what the extra cost would be.