Financial services firms across the board should be questioning their commitment to customer care following a rise in complaints made to the Financial Ombudsman Service (FOS). In the last financial year, some 388,000 new

FOS complaints were made, up 14% from the previous year. This is a worrying trend, given recent years have been dominated by complaints about payment protection insurance (PPI).

With the cut off deadline for PPI claims fast approaching on 29th of August, and the fact they are tailing off in any case, there are clearly plenty of other problem areas that need looking into. So, which are of biggest concern?

Fraud and scams
The FOS has shown over 12,000 complaints were logged in 2018/19, a rise of 40% on the previous year. So-called ‘push payment’ scams, where customers are tricked into making money transfers to fraudsters, were described by the FOS as one of the fastest growing types of fraud. As chief executive Caroline Wayman said:

“Fraud and scams are becoming ever more sophisticated. We know from the complaints we see that banks aren’t always treating victims of fraud fairly. They must do better.”

IT failures
Banks are also facing criticism for not managing their systems, which came to a head with the IT meltdown at TSB – this prevented customers being able to access their accounts. Overall, IT issues led to some 15,000 FOS complaints, an 8% rise on the previous year.

Payday loans
Complaints against payday lending companies hit a five year high – there were nearly 40,000, up 130% on the previous year. However, while the volume is alarming, it should be noted many of these are not coming directly from borrowers, as they are made by claims management companies. Not all of these ‘farmed’ complaints hold water and are often deliberately being made in bulk. The aim is to overwhelm lenders and the FOS, with the hope they will agree compensation payments since there is less time to make adequate checks. But, claims management firms are now subject to FCA regulation and the regulator has warned if the FOS is rejecting too many claims, then authorization could be denied.

Insurers are also under the cosh, with complaints against them rising 61% in five years and one in three of these upheld in favour of the consumer. Analysis by Which? showed there were 25,122 travel, home and car insurance complaints lodged between April 2018 and March 2019 and some 31% of these complaints were in favor of the policyholder.

Buildings insurance was the cause of most complaints with a rise of 42% of claims found in favor of the consumer, followed by travel cover with an increase of 34%, while some 29% of complaints about car insurance were upheld. The research also found that most complaints were made because of policy exclusions, disagreements about non-disclosure and pre-existing conditions. Despite this, trade body, the Association of British Insurers, pointed out:

“The complaints number cited by Which? makes up just 0.04 per cent of all current home, motor and travel policies.”

Action is needed
No matter what reasons – or excuses – exist, financial services firms that fail to get their houses in order could find matters worsen still further. From this April, consumers can now claim up to £350,000 in compensation – the FCA more than doubled the previous limit from £150,000, with the sum increased to cater for more high value complaints. According to FCA chief executive, Andrew Bailey:

“Consumers and small businesses struggle with the cost and time needed to take firms to court, so it is essential they can receive fair compensation from the Financial Ombudsman Service when things go wrong.”

Meanwhile, those providers which offer corporate products should also be aware that the FOS now also offers its service to larger SMEs, in addition to micro firms and consumers, bringing an additional 210,000 into its remit. As Ms Wayman added:

“Too often we see the interests of consumers are not hard-wired into financial services. This marks a five-year high in the number of complaints consumers have brought to us, and the behavior we’ve seen from some businesses is simply not good enough.”