Latest FOS complaints data shows that there is "light at the end of the tunnel" for banks, says expert

Out-Law News | 03 Sep 2014 | 5:06 pm | 2 min. read

The number of disputes between consumers and financial services firms referred to the financial services ombudsman (FOS) is beginning to fall, although complaints unrelated to payment protection insurance (PPI) have increased slightly, according to official figures.

The FOS took on 191,129 new cases in total in the first half of 2014, of which 70% or a total of 133,819 were new PPI complaints, it said. Complaints about financial products other than PPI increased by 3%, to 57,310, compared to the second half of 2013, it said. This involved banking complaints increasing by 7% and complaints against insurers by 1%, it said.

Banking litigation expert Michael Isaacs of Pinsent Masons, the law firm behind, said that banks "would not be complacent" about the figures.

"They know other claims and themes are out there that they still have to manage; and stripping out PPI, FOS complaints are up 3%," he said.

"However, with overall FOS complaints being down over 40% and looking at being their lowest for three years this is a rare bit of good news for banks. Even factoring in the FCA's confirmation that the banks are reopening 2.5 million PPI complaints, it shows that there is at last light at the end of the tunnel. If you scratch below the surface you also see that the percentage of PPI complaints being upheld at FOS is decreasing – from 82% in 2011/12, 65% in 2012/13 and 2013/14 and now running at 61%," he said.

The FOS is the independent body which deals with complaints by individual consumers against financial services companies which cannot be resolved through that company's own procedures. It is funded by a general levy on the financial services industry, calculated in line with the estimated proportion of complaints generated by each of the different sectors, as well as individual case fees charged to those firms which generate the largest number of complaints.

PPI was intended to cover repayments due on loans or credit cards for people who could not afford them due to an accident, unemployment, sickness or death. However, these products were widely mis-sold to customers who in some cases were not told that a policy was optional or that the policy they were sold did not cover their circumstances.

Chief ombudsman Caroline Wayman said that although responsibility for sorting out the "mass mis-sale" of PPI still accounted for most of the FOS workload, there had been a "marked change" in the type of complaints referred to it during the first half of 2014.

"We're seeing more and more people turn to us in frustration where they feel their bank or insurer simply doesn't understand or really care," she said. "And we're hearing growing dissatisfaction from people about being processed industrially as a number rather than being listened to as an individual customer."

"By giving their customers more thoughtful, considerate and personal responses – clearly setting out the reasoning behind an individual decision – we know that businesses can help sort problems earlier on, prevent complaints being escalated to the ombudsman and rebuild trust and confidence more generally," she said.

Isaacs said that the resolution of PPI mis-selling complaints had led to a "paradigm shift" in the way that banks now dealt with customer complaints, which would likely influence responses to any future "thematic" complaints on a similar scale.

"With [market regulator] the Financial Conduct Authority taking a regulator-led approach to customer redress, whether the FOS will see as many complaints in future is not yet clear," he said.

Last week the FCA announced that banks, credit card providers and personal loan companies would reopen 2.5 million PPI complaints first assessed in 2012 and 2013 due to regulator concerns that some customers may have been unfairly rejected for or did not receive enough compensation.