Out-Law News 3 min. read

UK financial ombudsman settled "record number" of consumer complaints last year


The UK's financial ombudsman service (FOS) settled a "record" 518,778 disputes between financial businesses and their customers last year, with 58% of that figure resolved in the customer's favour.

Payment protection insurance (PPI) continued to make up the majority of disputes resolved by the FOS, rising 6% from last year's figures to 399,939. However, its annual report also highlighted a near doubling in the number of complaints from consumers about the mis-selling of inappropriate self-invested pension products (SIPPs), of which 78% were resolved in favour of the consumer.

"It's been an unprecedented 12 months for the ombudsman by anyone's standards," said chief ombudsman Tony Boorman. "Complaints continued at record levels - and we resolved over half a million cases during the year."

"In our experience, people are simply looking for honest, straightforward answers that show someone has listened and helped make sense of things. So whether it's dealing with a complex pension complaint or problems with a mobile banking app, the financial services sector continues to face the challenge of putting the customer at the centre of their business," 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.

According to its annual report, the ombudsman answered around 2.3 million enquiries from consumers in the year to April 2014; which was the equivalent of around 40,000 every week. Almost a quarter of those enquiries were about general financial problems and concerns, rather than being product-specific. The figures showed that four of the UK's largest banking groups accounted for 63% of formal complaints received by the ombudsman. It resolved 71% of complaints that did not involve PPI within six months, according to the report.

The FOS said that it had handled 1,039 cases relating to SIPPs over the past year, up from 697 in the previous period. According to the report, many of these complaints involved the suitability of advice to invest in higher-risk unregulated collective investment schemes (UCIS) within a SIPP and came from "consumers who had been looking for better returns than they could achieve through more conventional investments".

A SIPP is a type of personal pension plan which allows individuals to choose how their savings are invested from the full range of investments approved by the UK government and tax authorities. Last month, financial services regulator the Financial Conduct Authority (FCA) issued a second warning to product providers to ensure that customers received advice on the suitability of the underlying investment and not just the product itself, after investigatory work revealed poor understanding by customers of the risks of investing in overseas property developments, store pods and forestry projects, amongst other unregulated products.

The FOS said that although the "torrent" of complaints it received last year in relation to the potential mis-selling of PPI had abated, the number of new complaints it was receiving weekly could still be "measured in the thousands" and it was left with a "stock" of 400,000 complaints awaiting resolution at the end of this financial year. The cases referred to it over the next few years were "likely to become increasingly complex and entrenched", with "likely implications" for its funding requirements in the near future, it said.

The biggest increase in complaints received by the FOS in the year to April were those relating to 'packaged' bank accounts, or those that come bundled with a range of other products and services in exchange for a regular fee. The ombudsman said that it received 5,667 of these complaints over the course of the year, up from 1,629 the previous year. Complaints came from "consumers who felt that they'd been sold a packaged account that didn't meet their needs", or who "said that their accounts had been 'upgraded' without their knowledge", according to the report.

However, the ombudsman said that it had "seen an encouraging improvement" in the way that banks investigated and dealt with these complaints over the course of the year. "By looking at our decisions and trying to align their approach to ours, they make it more likely that a complaint can be resolved without the need for our involvement," the report said.

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