The Financial Ombudsman Service, on its fifteenth anniversary, has published its annual review of the year ending 31 March 2015. Sarah Hope examines the key figures and trends from the review
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The Financial Ombudsman Service (FOS) was set up under the Financial Services and Markets Act 2000 to tackle disputes which financial businesses and consumers have been unable to resolve themselves. It serves as an alternative to litigating in the courts.
In the past 15 years, FOS has received over 2,750,000 complaints, with just under half of those complaints relating to payment protection insurance (PPI).
FOS receives almost 5,000 initial enquiries and complaints from consumers each working day, which is a reduction of approximately 25% on the previous year (the year ending 31 March 2014). The consumer helpline passed on 329,509 new complaints out of the initial enquiries received, which is a 26% decline on the previous year.
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By GlobalDataNew PPI complaints declined by almost 50% compared to last year while still accounting for 63% of new complaints (204,943 complaints), followed by 24% about banking and credit (79,763 complaints), 9% about insurance excluding PPI (30,080 cases) and 4% about investments and pensions (14,723 cases).
Complaint increases were seen in relation to packaged bank accounts (278% increase), credit broking (up 87%), debt collection (up 51%) and payday lending (up 46%). Complaints in respect of credit cards were down by 19%.
FOS has looked into complaints about a wide range of consumer credit products and this year has been the first full year in which the Financial Conduct Authority (FCA) has regulated the consumer credit market.
Consumer credit products and services (i.e. hire purchase and debt collecting) accounted for 7% of all new cases (other than PPI). FOS received 1,582 complaints about point of sale loans (up 12% from the previous year), 1,784 complaints about hire purchase (up 18%) and 333 cases about hiring, leasing and renting (up 14%).
Payment Protection Insurance
PPI is still the single most complained about financial product that FOS deals with by some margin, and the decline in new cases from the 2013/2014 peak is slower than FOS expected.
FOS averaged 4,000 new PPI complaints a week over the year. Although FOS has resolved 328,915 PPI complaints in the past year, there are around 250,000 outstanding complaints. In order to deal with the volume of complaints, FOS recruited a further 200 case handlers to deal with PPI customers.
Of the new PPI cases during the year, 79% were brought by claims management companies.
FOS has stated that the nature of the PPI cases it is dealing with has changed. Most of the initial complaints about PPI involved similar issues around the way policies were sold by larger businesses. Now FOS says they are handling far more complex and entrenched complaints, and many more complaints involving smaller businesses which sold PPI alongside their main financial products.
How are financial businesses dealing with complaints?
FOS highlighted that consumers sometimes articulate what has gone wrong in an unfocused way that does not seem reasonable to the business. However, they see cases where the business has simply dismissed their customer’s concerns when a clear, positive conversation could have got to the root of the problem.
FOS found only 6% of cases to be "frivolous and vexatious", which means that FOS decided that it would be unfair to charge the business a case fee.
FOS praised businesses that are prepared to work flexibly, including sending FOS files or information in shorter time frames and being ready to use the telephone rather than letters or emails. FOS says that businesses have shown readiness to collaborate with it to pilot new and smarter ways of working.
How FOS resolves cases
FOS resolved a total of 448,387 complaints this year with 405,202 of those complaints settled by adjudicators. Given that PPI cases are becoming more complex and entrenched, there was a significant increase this year in the number of PPI complaints that were decided by an ombudsman. In total, 10% of the complaints FOS resolved were decided by an ombudsman.
On average, FOS found in the consumer’s favour in 55% of the complaints it resolved during the year, which is slightly lower than last year. Uphold rates for different individual financial products and services varied significantly, with 61% of complaints against banks upheld in the consumer’s favour compared with 13% of complaints against building societies.
What can we expect in the future?
There are a number of themes emerging from this review:
Information sharing – FOS has a strong, open relationship with the FCA. This year the insight and information shared by FOS with the FCA has helped shape the payday lending market.
Caroline Wayman, chief ombudsman of FOS, also refers to FOS working with the Department for Business, Innovation and Skills and using 15 years’ experience of settling complaints out of court to inform the strategy for implementing the EU directive on ‘alternative dispute resolution’.
Going digital – as financial institutions keep pace with technology, FOS is also seeking to utilise digital platforms. A number of complaints have been resolved this year using FOS’s webchat service.
Since January 2015, 10,000 people have told FOS about their complaint via the online digital platform. Those numbers are expected to grow significantly in the next 12 months.
Relationships – FOS continues to grow its relationships with consumer organisations such as Which? and Citizens Advice as well as financial institutions and trade associations and it continues to run its industry liaison panel.
Working openly – there are now over 60,000 ombudsman’s final decisions on FOS’s website and FOS received around 500 freedom of information requests. It’s clear FOS is committed to working openly and to publish as much as it can about its work and the issues it deals with.
Sarah Hope, is a senior associate at Eversheds LLP
