Financial ombudsman reveals huge rise in caseload

Out-Law News | 05 Feb 2019 | 9:44 am | 2 min. read

The Financial Ombudsman Service (FOS) has experienced a significant rise in the number of cases it is handling, its chief executive has told a House of Commons committee.

Giving evidence to the Treasury Select Committee for its inquiry into the FOS last week, chief executive Caroline Wayman said consumers were waiting longer for decisions on cases referred to the service than before it was overhauled in 2016.

Wayman said the FOS would have expected to see around 100,000 cases a year, with volatility in numbers predominantly in payment protection insurance (PPI) claims. However "quite unprecedented growth" in areas such as short-term lending had led to an increase of 30 to 50% in case numbers, she told the committee.

Cases related to payday lending had risen to "at least 50,000", said Wayman, an increase from around 2,000 cases only two or three years ago. Wayman said the number of complaints relating to short-term loans would have been even higher had major lender Wonga not gone into administration.

During the evidence session committee member Rushanara Ali revealed that a whistleblower within the FOS had written to MPs to tell them that the waiting time for a complaint to be allocated to a caseworker is now more than 10 times what it was before the 2016 restructure of the service, with approximately 30,000 cases still waiting to be allocated.

Ali said the whistleblower had also said the queue for an ombudsman's decision is now three times what it was before the restructure, with 8,000 cases still to be decided on.

Wayman confirmed the numbers were "about right" and said the FOS was planning to bring in additional resources but also ensure complaints went to the right place.

"Financial business, particularly payday lenders, I have to say, is an acute area at the moment of cases coming to us that should not come to us," Wayman said.

She said the FOS had not become less effective as a result of the restructure, but busier.

Regulatory compliance expert Tom McDonnell of Pinsent Masons, the law firm behind, said the number of cases being handled by the FOS was likely to continue rising.

"Consumer awareness of the FOS has been raised significantly in recent years through a number of high-profile issues and upcoming changes to the FOS are only going to increase its remit and its workload," McDonnell said.

Last year the Financial Conduct Authority (FCA) issued proposals to increase FOS award limits to a maximum of £350,000 from the current £150,000, as well as extending the service’s jurisdiction to cover complaints from SMEs, charities and trusts of a comparable size and personal guarantors of certain loans from April 2019.

"An update on the FOS award limit consultation is expected in early spring, but if it is approved we consider it is inevitable that this will serve to boost FOS complaint numbers," McDonnell said.  

"Another factor to be considered is the difficulty of challenging a FOS final decision, as recently highlighted by the failed application for judicial review of a FOS decision, by SIPP administrator Berkeley Burke. Understandably a final and binding decision against providers at no cost to consumers, ensures FOS remains an attractive forum for resolving comparatively low value disputes between firms and consumers," McDonnell said.