So often individuals feel they have no hope of fighting a financial Goliath when a money problem arises, particularly when they are ignored or given no proper resolution.
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Fortunately, the Financial Ombudsman was created almost 20 years ago to investigate impartially and order awards.
The most recent annual report and accounts from the FO show a continuing and massive demand for its service which has received over 3.6m complaints since it was founded. From April it has extended its remit to accept complaints made by small and medium-sized enterprises as well as by customers of management firms.
It expects a problem to be initially referred by the customer to the company involved. It expects complaints regarding payment services (such as bank transfers and direct debits) as well as electronic money (like travel money cards) to be answered within 15 days and for most other complaints in up to eight weeks.
The final response should indicate that the individual has the right for six months to refer the dispute to the FO. Once it reaches the FO, it will seek in an independent and unbiased way to see what has happened and reach an answer that helps both sides to move on.
Financial advisers who give the wrong advice are included in its remit. However, ‘introducers’ are not even though they can entice savers into high risk schemes which can be passed through an individual’s self-invested personal pension or SIPP.
Advisory firms which are caught out and ordered to make payments can currently just shut their business down and restart under another name. Therefore use an adviser who is from a known, reputable business of some size.
Companies do not pay a levy until more than 25 cases have been raised when £550 is charged per investigation, which has not increased for seven years.
Nine out of 10 businesses referred did not pay any case fees. The eight companies creating the most complaints – notably Barclays, Lloyds, HSBC and The Royal Bank of Scotland – have negotiated a special rate.
The FO budget is now large. It expects to raise £297m which includes £45m in levies. Costs are forecast to rise to £332m, using £35m of its contingency fund to balance the books.
Over the last year, more than 388,000 new complaints were registered which is a 14 per cent increase. The FO work was split between:
Payment Protection Insurance (PPI) 46 per cent
Banking and credit 39 per cent
Insurance (excluding PPI) 11 per cent
Investments and pensions 4 per cent
PPI was the highest subject even though its numbers peaked in 2014. At one stage the FO was receiving 12,000 PPI cases a week. Banking and credit cases numbered 149,933.
Packaged bank accounts have seen a spike in complaints and “worryingly, a dramatic rise in people contacting us about borrowing”, says the FO chairman, Sir Nicholas Montagu. Excluding PPI, the subject accounts for one in three of all complaints.
Disputes involving consumer credit products rose dramatically, notably with hire purchase (up 54 per cent by volume), debt collecting and catalogue shopping.
Quite often, some of the most vulnerable members of society are involved, notably with short-term lending. The FO resolved more than 25,000 complaints involving payday loans with six in 10 cases upheld. This “suggests diligent lenders have been the exception”, says Caroline Wayman, the chief ombudsman.
Wayman says this is disappointing and comments that it is essential for regulators and lenders to work together “to ensure this type and scale of unfairness does not arise again”.
The collapse of lenders WDFC (Wonga) and Curo Transatlantic meant that thousands of borrowers needed to pursue their claims through the administrators, rather than via the FO.
Insurers have been warned about penalising customers’ loyalty and banks challenged to deliver better outcomes for victims of fraud, pointing to the increasingly sophisticated nature of criminals’ methods.
The implications of the ongoing shift to online banking can result in IT failures, generating thousands of complaints. TSB was a prime example. The ombudsman says that, regardless of whether such problems are avoidable, they need to consider the impact on individuals, which in some cases has been significant.
Insurance cases amounted to 42,346 which included a 42 per cent increase in issues affecting buildings cover. Disputes affecting contents cover rose six per cent to 1,841 whilst motor insurance problems increased nine per cent to 12,977.
Investment and pension cases rose to 15,606, a 24 per cent increase, but there was a reduction in the proportion of pension disputes from 48 to 42 per cent. Mortgage arrangements continued to create problems with a 13 per cent rise to 10,087.
Wayman recognises that problems need to be resolved “as soon as possible” but an FO whistleblower told the Treasury Select Committee that the time taken to even allocate a case worker has jumped 10 times since 2016. In January, Westminster heard that 30,000 cases had not started their first stage of the complaints process.
The delay in obtaining a verdict has also grown, taking three times over the same period. MPs were advised that 8,000 individual cases were awaiting a decision. The annual report says 90 per cent of complaints were resolved “with an informal view” but this means a legally qualified ombudsman may not have been involved.
Some complaints are not resolved in 12 months. The report reveals 78 per cent of cases which are over a year old have now been completed.
A contractor workforce has been developed to handle changing demand. Since FO decisions are binding on the firm involved but not the individual, complainants who feel their case has not been fully investigated can subsequently take legal action.
Wayman is paid £306,027 including pension benefits and supported by over 360 ombudsmen.
Overall only 28 per cent of complaints were upheld, a fall from 34 per cent, leading some commentators to accuse the FO of siding too much with financial providers.
The PPI problems raised were upheld in 21 per cent by comparison with 36 per cent the previous year.
The report gives no mention of key qualifications held, notably in the fields of accountancy and law. This is a significant omission and may explain why cases have subsequently been overturned in court.
With almost a quarter of adults (24 per cent) not trusting the service given by the FO, there is still much work to do.
Financial Ombudsman Service 0800 023 4567.