Posted: 21st March 2014

The Financial Ombudsman Service (FOS) publishes the numbers of complaints it receives and upholds by product each quarter.

Q3 figures are out. Here we select the latest complaints trends, uphold rates and root cause analysis from the ombudsman published final decisions.

Goodbye PPI?

It is no secret that the financial services industry continues to tackle the effects of payment protection insurance (PPI) mis-selling. However, we are seeing a reduction in numbers of PPI complaints going to the FOS and a steep reduction in the uphold rate. During Q1 April to June 2013 the uphold rate was still sky high at 78%; Q2 July to September 2013 this subsided to 61% and now, for the first time in years, the rate of complaints upheld in favour of the customer has fallen to below half at 48%.

This is positive for the industry, the FOS and customers. However, the FOS warns, “we are by no means out of the PPI woods yet.” That seems the case, given the FOS expects to start its new financial yet in April with at least 400,000 PPI cases on its books.

Top of the FOS

The FOS focusses on annuities and PPI in its newsletter and analysis of Q3 figures. Looking to other interesting figures, current accounts and packaged bank accounts continue to top the FOS news by number of complaints and uphold rate respectively.

At 11,146 complaints, current accounts remain second only to PPI in Q3 and the year April to December 2013. Given the blanket use of current accounts in the UK, the high complaint figure, with 32% uphold rate, is an area for potential improvement but not an alarming one.

Packaged accounts call out for attention however. Of the 3,107 complaints about packaged accounts in the financial year April to December 2013, the complaint was upheld in a notable 80% of cases. This is the highest uphold rate amongst all products. Whilst packaged accounts are not currently the daily bread of the press, the increase of complaints quarter on quarter – Q1 736, Q2 1,100, Q3 1,261 – combined with the high uphold rate and the number of packaged accounts in the UK should keep this product firmly on firms’ radar.

Packaged account upholds: key reasons

There are two clear reasons for the high rate of packaged account complaints upheld in favour of the customer. We gained this insight from analysis of online published ombudsman decisions:

1)    Customers did not know their packaged account had an associated cost. Packaged account providers did not make clear in bank statements what the money was for and that it was a monthly fee. Customers presumed the withdrawal was a one off transaction cost

2)    Customers, especially students, were automatically upgraded to a packaged account with a monthly cost. Customers received letters with a free trial period for an account. Thereafter, the customer was required to opt out to avoid payment being taken after the trial

Firms can address these issues before they occur. Be clear on a bank account statement what payments are for: e.g. monthly payment for packaged bank account. This transparency is lacking in many upheld complaints. Trial periods with automatic upgrades are not popular with the FOS; reviewing use of opt-out sales strategies is a good place to start.

The FOS publishes final ombudsman decisions online. This is available to all firms and is a free source of comparative complaints root cause analysis.

Looking ahead

As the Financial Conduct Authority (FCA) welcomes the consumer credit industry to its fold, so does the rest of the financial services infrastructure. The FOS is well known to currently regulated firms and is now reaching out to newly regulated consumer credit companies. Even though the FOS has been the ombudsman for consumer credit firms since 2004, it is visiting businesses and addressing Q&As in its quarterly newsletter to firms such as motor dealers.

Essentially, the FOS is adjusting to a new audience which does not know or understand it. Expect to see the FOS getting back to basics and adapting to the changing market place in 2014 and coming years.

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