Posted: 20th May 2019


On the 15th May, the Financial Ombudsman Service (FOS) published its Annual Review for 2018 / 19, alongside a “Data in more depth” document, providing an overview of its case handling over the last twelve months and the recurring themes within complaints.

Caroline Wayman, the Chief Ombudsman and Chief Executive of the FOS, introduces the report with some impressive – but perhaps not surprising – statistics, saying:

“The past 12 months have been our busiest for five years. People brought more than 388,000 complaints to our service – up 14% on the year before. All in all, we dealt with nearly 1.7 million phone calls, emails and letters from people concerned about their money.”

Wayman goes on to highlight the fact that consumer credit-related complaints have risen dramatically in the last year (89% on the year before). When PPI is excluded from this measurement, consumer credit-related complaints accounted for one in every three new cases received in 2018 / 19. The Chief Ombudsman makes the point that too many customers have been left struggling with unsustainable debt, with “diligent” short-term lenders being “exceptions” to the rule.

Banking and credit-related complaints made up 39% of all new cases, insurance 11% and investment and pensions a mere 4%.

PPI complaints, due to be time-barred in only three months’ time, made up 46% of all new complaints escalated to the FOS in the past 12 months. The FOS upheld only 21% of these complaints, compared to an average of 38% for all other sectors.

Overall, the Annual Review centres around five key themes:

  1. Unsustainable debt in high-cost short-term credit (HCSTC)
  2. IT failures and fraud within banking
  3. Insurance renewal pricing
  4. Investment and pensions
  5. The end of PPI

The FOS was able to resolve 27% of all consumer credit-related cases within three months in this past year, a significant decrease from 62% the year before. Concerned that businesses are failing to assess affordability, the FOS suggests that these firms “aren’t learning enough from the complaints [it has] resolved.”

Incredible advancements in banking channels and technology have been widely accepted and praised, but the FOS also makes the point that this new environment is a fertile ground for scammers and fraudsters “who are moving with the times”. Broader use of technology also means more opportunity for things to go wrong, with complaints about IT failure in banking systems resulting in a significant number of complaints this past year.

42,346 complaints were made about insurance products and services, the FOS suggesting that this is largely the result of firms not treating their customers fairly at renewal time. The ‘loyalty penalty’, which we’ve discussed a number of times now, makes up a significant part of the FOS’s Annual Review. Insurance customers rely on their providers to “do the right thing” and place a huge amount of trust in them. It is up to firms to recognise – through complaints root cause analysis, for example – how they can improve the customer experience and ensure that, in the next report, complaints volumes are down.

The investments and pensions sector accounted for 15,606 complaints, with “unsuitable advice” around retirement plans putting customers at unnecessary risk and under unnecessary pressure. Again, technology failures that took out, or otherwise limited access to, investment platforms also sparked a flurry of complaints.

The FOS Review states that the Ombudsman had received around 2,000,000 PPI complaints by January 2019 and had resolved around 1.9 million of them. While you may think that all of the PPI complaints that were going to be made would have been made by this point, it is unlikely that we will see anything like a neat tail-off. The FOS highlights that it will be taking a more “flexible approach to getting fair, quick and informal answers” from firms and customers regarding these complaints in an effort to manage uncertainty ahead of the deadline.

What comes next?

The FOS promises to work more closely with firms in the coming year, particularly in the credit and banking sectors where a number of issues have been identified.

Considerations for firms

It is obvious that consumer credit firms are squared in the sights of the FOS and will have to find ways to reduce the volume of complaints being escalated to it. The FOS has expressed its desire to work with such companies, and with the FCA, to ensure that cultural change and operational evolution ends up leading to better customer outcomes and prevents further collapses.

Root cause analysis, as always, will play a significant part in ensuring ongoing quality of service and mitigating any further increase in complaints volumes – for any firm, not just lenders. Being able to properly identify the cause of past issues, rather than just cure their symptoms, will set your firm on the path to fiscal, reputational and compliance success. Bringing in a trusted third party to independently review your operations with fresh eyes could make all the difference, allowing you to spot issues that may have remained long buried.

When assessing cases escalated to ombudsman level, there are several considerations to take into account:

  • How are you likely to get the best results in an ombudsman case?
  • Should the same set of people work on the case as dealt with the original customer complaint, or should it be escalated to a fresh pair of eyes?
  • How much compensation are you willing to offer?

There are various data points which firms could now feasibly track to gain genuine insight from FOS complaints. These include the likelihood of escalation based on the emotional sentiment of the complaint, keywords used, the time a complaint takes to process and so on.

In the end, ombudsman cases – despite their financial, resource and reputational cost – offer invaluable opportunities for firms to review their processes. Crucially, firms should not simply take resolution as a tick-box exercise. Instead, they need to use freely-available data on complaints to drive positive change.

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