Complaints over financial services reach new heights

Customer dissatisfaction with financial firms has reached record levels with half a million new complaints dealt with in the past year, according to new figures.

The Financial Ombudsman Service (FOS), which settles disputes between consumers and financial firms, said businesses are still failing to do enough to settle complaints themselves, meaning consumers increasingly turn to the service to intervene.

In its annual review, the service said it has seen its caseload almost double in the past financial year, as it tackled a record 508,881 new cases, marking a 92 per cent annual increase.

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Four of the UK’s big banking groups – Lloyds, Barclays, HSBC and Royal Bank of Scotland (RBS) – accounted for almost two-thirds (62 per cent) of all complaints received by the ombudsman, a 10 per cent increase from the previous year.

More than two million inquiries from consumers were handled by the ombudsman service over the year, equating to more than 7,000 calls each working day.

Over the course of the year, 49 per cent of cases were upheld by the ombudsman in consumer’s favour, including 69 per cent of complaints relating to payment protection insurance (PPI).

The PPI scandal drove the upswing in complaints, making up almost three-quarters (74 per cent) of the cases dealt with. Complaints about PPI more than doubled year-on-year and complaints about current accounts rocketed by just over one-third, following two years of declines. Complaints about the latter often involved people who were in financial difficulty but felt their current account provider had failed to do enough to help them.

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Many complaints involved overdraft facilities being suddenly withdrawn and difficulties in cancelling payments.

There was also an increase in complaints by people who believed that insurance deals packaged together with current accounts were mis-sold to them, while complaints about payday lenders have risen by 83 per cent in a year.

Mortgage complaints soared by 25 per cent, largely due to administration errors such as incorrect monthly repayment calculations, and the FOS said it had seen a “significant” increase in people unhappy with the way their lender had treated them when they struggled to make mortgage repayments, in circumstances such as facing redundancy.

The ombudsman said it found lenders’ staff often appeared unable to explain clearly to consumers how the mortgage products worked or answer complex questions.

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Natalie Ceeney, chief ombudsman of the FOS, said: “We have seen 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.

“As levels of confidence in financial services have eroded, it is disappointing we still haven’t seen any significant improvement in complaints handling. Too many financial businesses still seem unable to sort out problems themselves, without the ombudsman having to get involved.”

Figures contained in the ombudsman service’s review also showed that one in six people across the UK have had a problem with a financial product or service.

High levels of awareness about the ombudsman service were found, with 73 per cent of people surveyed saying they knew about the service, while rising numbers of older people were coming forward. One quarter of people who use the FOS are now aged over 65.

Around one quarter of initial inquiries to the ombudsman now go on to become a formal dispute.