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annual review 2011/2012

1 April 2011 to 31 March 2012

what the complaints were about

new cases by area of complaint

type of complaint 2012 2011 2010 2009 2008
banking and credit 24%
(64,234 cases)
31.5%
(65,063 cases)
44%
(71,700 cases)
43%
(55,038 cases)
56.5%
(69,238 cases)
investments and pensions 6%
(14,862 cases)
7.5%
(15,483 cases)
14%
(22,278 cases)
17.5%
(22,265 cases)
21.5%
(26,565 cases)
insurance excluding PPI 10%
(27,563 cases)
10%
(20,978 cases)
12%
(19,838 cases)
15%
(19,102 cases)
13.5%
(16,634 cases)
payment protection insurance (PPI) 60%
(157,716 cases)
51% (104,597 cases) 30%
(49,196 cases)
24.5%
(31,066 cases)
8.5%
(10,652 cases)
new cases in total 264,375 206,121 163,012 127,471 123,089

year ended 31 March

what financial products the new cases involved

financial product %
payment protection insurance (PPI) 60
credit cards 7
current accounts 6
mortgages 4
consumer-credit products and services 
(eg hire purchase, debt collecting and catalogue shopping)
3
motor insurance 3
unsecured loans 2.5
buildings insurance 2
savings accounts 1.5
whole-of-life policies and savings endowments 1.5
pensions 1.5
"with-profits" and unit-linked bonds 1.5
mortgage endowments 1
travel insurance 1
contents insurance 1
other products 3.5

what issues the cases involved

insurance (excluding PPI): 10%

of which

  • complaints about sales and advice: 16%
  • complaints about claims: 64%
  • complaints about administration: 20%

payment protection insurance (PPI): 60%

of which

  • complaints about sales and advice: 99%
  • complaints about claims: 0.5%
  • complaints about administration: 0.5%

banking and credit: 24%

of which

  • complaints about charges: 40%
  • complaints about administration: 29%
  • complaints about sales and advice: 10%
  • complaints about transactions: 7%
  • other complaints: 14%

investments and pensions: 6%

of which

  • complaints about sales and advice: 61%
  • complaints about administration: 31%
  • other complaints: 8%

new cases by financial product or service       

new cases by financial product or service year ended
31 March 2012
year ended
31 March 2011
payment protection insurance (PPI) 157,716 104,597
credit cards 19,183 17,466
current accounts
including complaints about
14,595 19,944
- business bank-charges 414 1,359
- direct debits and standing orders 538 571
mortgages 9,537 7,067
consumer-credit products and services
in relation to activities covered by our consumer credit jurisdiction - including complaints about
7,416 7,250
- point-of-sale loans 2,247 2,765
- hire purchase 1,545 1,395
- catalogue shopping 695 582
- credit broking 627 697
- debt collecting 576 512
- store cards 476 480
- debt adjusting 462 302
- pay-day loans 296 -
- hiring, leasing and renting 240 221
- debt counselling 124 155
- credit reference agency 69 40
- home credit 41 34
motor insurance 7,264 5,784
unsecured loans 6,262 5,820
other types of general insurance
including complaints about
5,488 3,904
- home-emergency cover 1,473 *
- commercial vehicles and property 1,065 746
- mobile phone insurance 599 *
- pet insurance 554 438
- roadside assistance 364 300
- guaranteed asset protection ("gap") insurance 213 182
- business protection insurance 160 204
- caravan insurance 89 63
buildings insurance 4,556 3,469
savings accounts 4,286 4,783
whole-of-life policies and savings endowments 4,186 3,328
pensions
including complaints about
3,454 2,706
- personal pension plans 1,827 1,407
- small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 562 472
- annuities 511 423
- SERPs 294 196
- income draw-down 94 66
- free-standing additional voluntary contribution (FSAVC) schemes 76 65
investment-linked products
including complaints about
3,308 3,784
- investment ISAs 904 834
- unit-linked bonds 856 849
- "with-profits" bonds 542 683
- guaranteed-income bonds 352 408
- "structured" products 139 550
- unit trusts 138 125
- PEPs 51 45
mortgage endowments 3,267 3,048
other banking services
including complaints about
2,955 2,733
- cash machines 836 878
- money transfer 688 529
- cheque clearing 670 691
- electronic payment 403 369
- foreign currency 74 55
- safe custody 70 63
travel insurance 2,431 2,536
contents insurance 2,089 1,697
portfolio management 1,152 1,148
income protection 965 720
extended warranty insurance 881 895
critical illness insurance 817 528
legal expenses insurance 805 635
stockbroking 690 1,119
private medical insurance 513 506
personal accident insurance 322 304
derivatives
including complaints about
237 350
- spread-betting 165 219
total number of new cases 264,375 206,121

 * not recorded previously as a separate category

what the complaints were about: insurance

Complaints about insurance made up 70% of the total number of new cases we received during the year (61% in the previous year). The number of new cases relating to insurance increased by 48% - from 125,575 in 2010/2011 to 185,279 in 2011/2012.

The table below show how these insurance complaints were spread across different products and services.

type of complaint %
payment protection 85
all other insurance-related complaints 15
type of complaint %
motor insurance 26.5
buildings insurance 16.5
travel insurance 9
contents insurance 7.5
home-emergency cover 5.5
commercial vehicle and property insurance 4
income protection 3.5
critical illness insurance 3
extended warranty insurance 3
mobile phone insurance 2
pet insurance 2
private medical insurance 2
roadside assistance 1.5
personal accident insurance 1
other (including "gap" insurance, caravan insurance and business protection insurance) 13

The increase in insurance cases largely resulted from the further 51% rise in the number of complaints about payment protection insurance (PPI) - from 104,597 in 2010/2011 to 157,716 in 2011/2012 - following a 113% rise in the previous year. This is the largest number of complaints we have ever received in a year about a single financial product.

We also saw a 26% increase in complaints relating to motor insurance, a 31% increase in buildings insurance complaints, a 23% rise in disputes about contents insurance, and a 55% increase in complaints involving critical illness insurance.

On the other hand, the number of complaints we received during the year about travel insurance fell by 4% and complaints about extended warranty insurance dropped by 2%.  

payment protection insurance (PPI)

year ended 31 March number of complaints
2012 157,716
2011 104,597
2010 49,196
2009 31,066
2008 10,652
2007 1,832
2006 1,315

annual trend: +51%

In last year's annual review we reported a 113% increase in the volume of complaints referred to us about payment protection insurance (PPI) during 2010/2011. We also reported in last year's annual review on the challenges arising from the judicial review brought by the British Bankers Association (BBA) - on behalf of a number of high-street banks - against the FSA and the ombudsman service on PPI-related matters.

This judicial review took place in the High Court at the end of January 2011. It involved a challenge to the introduction of the FSA's guidance on PPI complaints and to parts of the online technical resource on our website. Judgment was handed down by the High Court at the end of April 2011 - endorsing our approach, and that of the FSA, to handling PPI complaints.

In May 2011 the BBA confirmed that it would not be appealing against the High Court ruling or continuing its legal challenge. With any legal uncertainty resolved, the FSA gave the businesses concerned a deadline for resolving the backlogs of cases they had put on hold during the judicial review. Some businesses were also given more time by the FSA to resolve new cases they had received following the judgment.

This initially led to a significant decrease in the number of cases referred to the ombudsman service. However, that decrease was soon reversed, as businesses caught up with their backlogs of complaints - and increasing numbers of consumers, unhappy with the outcome of those complaints, subsequently referred their dispute to us. This resulted in the number of new PPI cases referred to us climbing steeply in the second half of the year - from fewer than 1,000 a week to over 1,000 every day.

This means that during the financial year 2011/2012 we received a further 157,716 PPI complaints - a 51% year-on-year increase on top of last year's record figures. PPI cases accounted for 60% of our total new workload during the year. In December 2011 we received our 300,000th PPI complaint.

These increasing volumes of PPI cases presented us with a significant challenge - and in January 2012 we consulted on how we planned to manage and fund the growing workload involved. These plans included significantly increasing the number of our case-handling staff - with up to 150 new people joining us each month - to deal with the volumes of new cases.

In order to fund these additional resources - which have had to be mobilised at speed - we consulted on charging businesses a supplementary case fee of £350 for each PPI mis-selling case referred to the ombudsman service from April 2012. This is chargeable only when businesses have more than 25 of these cases a year - reflecting where the costs are actually incurred in having to sort out PPI mis-selling on this scale.

We have continued to promote the use of our standard PPI documentation for referring PPI disputes - to help encourage more efficient, co-ordinated and consistent complaints-handling by claims-management companies and across the financial services industry. We have received positive feedback about the standard PPI forms for consumers and businesses - and how these forms can help the complaints-handling process.

However, during the year we have again seen some claims-management companies taking a disappointingly lax approach to completing the questionnaire on behalf of consumers. Where a form is completed inaccurately - or not at all - we may not be able to progress the complaint. We have made our position on this very clear to the claims-management companies in question - and we have required a number of them to withdraw their complaints and to re-complete the questionnaires again in full.

The quality of the information provided by claims-management companies to support their clients' cases also continues to vary significantly. Some provide clear and cogent arguments on behalf of the consumer. Others simply make general allegations, some of which have no relevance to the individual dispute. However, as we said last year, these same points can sometimes also be made about the information provided by financial businesses.

Too often, the true facts of a case are properly addressed only after the dispute is referred to the ombudsman service. This continues to be frustrating and time-consuming. It does not help the parties in resolving the dispute fairly and as quickly as possible - which must be in everyone's interests.

We have also continued to see a significant number of cases where, after investigation, it emerged that no PPI policy had ever been in place. It is essential that businesses and claims-management companies make every effort to check this before the matter is referred to the ombudsman service.

During the year we hosted an event on this topic for representatives from financial businesses and claims-management companies, to work together on the practical steps that everyone involved can take to avoid unnecessary complaints and delays. We put more information on our website about this - and we wrote to businesses and claims-management companies, reminding them of our approach and of the actions they should take before a complaint is referred to us.

If either a financial business or a claims-management company appears to be acting unreasonably, we refer these matters to the relevant regulator.

motor insurance complaints

year ended 31 March number of complaints
2012 7,264
2011 5,784
2010 5,451
2009 6,267
2008 6,009
2007 4,230
2006 3,372

annual trend: +26%

The number of complaints involving motor insurance increased significantly during the year - by 26% - following a smaller 6% rise in the previous year. This is likely to reflect the tougher economic times. We are seeing more entrenched cases being harder fought - with less enthusiasm on either side for informally negotiated settlements.

However, it is disappointing when insurers continue to pursue cases to the final stage - requesting final decisions from an ombudsman - in areas where our approach is well known and clearly set out. The online technical resource on our website covers in detail the areas of motor insurance where we most frequently see complaints.

During the year we saw a 17% increase in the number of complaints involving guaranteed asset protection (so-called "gap" insurance). This is often sold alongside motor finance, to cover the "gap" between the amount paid out by a motor insurance policy and the amount still to be repaid on the finance that was taken out to buy the vehicle.

In the complaints we see, we are concerned that sellers do not always explain the limitations of the cover - particularly the fact that policies generally cover only the finance for the car and not any additional purchases such as insurance products and service plans. We also see cases where the consumer has paid more for the car than its recommended retail price. As this will not be reflected in the settlement of any claim, the consumer may find themselves out of pocket.

"Gap" insurance policies can last several years - but they often provide no refund if they are cancelled early. During the year we upheld cases about this, where we had concerns that the seller of the insurance had not considered properly the suitability of this type of policy for the customer.

In our annual review last year we highlighted our concerns about the thoroughness of insurers' investigations into claims for stolen vehicles. During the year, latest information from the Thatcham Motor Insurance Repair Research Centre and the Metropolitan Police gave us sharper insight both into the reasons behind car theft (with cars increasingly stolen for their parts) and the methods used to steal modern cars.

In complaints we see, insurers can still be too quick to assume that thefts are not genuine. In these cases, we need to see that there has been a proper investigation. To be able to establish that fraud has taken place, there must be a very high degree of probability. This means more than just suspicion. When we are considering a dispute like this, we expect the vehicle to have been thoroughly examined and the consumer to have had the opportunity to explain any perceived anomalies.

We have also had concerns in some cases about the way in which the insurer has investigated issues around "non-disclosure" by the consumer. This has included disputes where the insurer had not properly considered whether the questions they asked the customer (or the questions on a comparison site) were sufficiently clear.

And some cases we have seen show that insurers have made assumptions that can be misleading - or have simply failed to ask the consumer for an explanation, in order to be able to consider whether any "non-disclosure" was innocent, inadvertent or deliberate.

Some of the disputes we see could have been avoided, if the insurer had been clear about the questions they asked - on what needed to be disclosed - when the consumer first applied for the policy. Our approach to "non-disclosure" and misrepresentation has developed over many years and has now been adopted into the law by the Consumer Insurance (Disclosure and Representation) Act.

For example, we have continued to see cases where insurers have not been clear - when they asked their customer generally about "convictions" - that they actually wanted to know about any fixed penalty points.

complaints about buildings and contents insurance

year ended 31 March buildings insurance complaints
2012 4,556
2011 3,469
2010 3,437
2009 3,447
2008 2,669
2007 1,951

annual trend: +31%

year ended 31 March contents insurance complaints
2012 2,089
2011 1,697
2010 1,863
2009 1,671
2008 1,363
2007 1,238
2006 1,224

annual trend: +23%

During the year we continued to see a significant number of complaints about buildings and contents insurance where a main part of the dispute involved the quality of the investigation carried out by the insurer into the claim.

For example, we have seen cases where claims for damage have been rejected on the basis of the loss adjuster's "gut instinct" rather than on specific evidence. This results in our having to make further requests for information from the insurer. In the meantime, there may be further damage - for example, caused during periods of severe weather.

In cases like this, we often recognise the inconvenience that the consumer has been caused, by telling the insurer to pay additional compensation for the customer's inconvenience.

The heavy snowfall and prolonged cold weather during the winter and early spring of 2010/2011 led to a substantial increase in the number of complaints referred to us about home emergency cover. Many of these complaints were caused by businesses being unable to cope with the spike in demand for repairs to broken boilers or burst pipes.

We also saw an increase in disputes relating to insurance premiums. The pricing of insurance is not a matter for the ombudsman. But there is clearly a difference between the legitimate exercise of commercial judgement and treating customers fairly.

For example, consumers frequently complain to us that a quotation for a new policy on the insurer's website is cheaper than the renewal premium they have already been offered by that insurer. This does not strike them as fair - especially if they have been customers of that insurance company for a long time.

We also continue to see complaints that an insurer has failed to make it clear that the sum insured should reflect the full value of the consumer's contents or home - and instead has just asked questions such as "what sum insured would you like?" We have handled cases during the year where this has left the consumer under-insured - or even facing allegations of misrepresentation, when they later tried to make a claim on their insurance policy.

Household insurance is an area where many of our approaches to settling disputes are well established. Businesses can refer their complaint handlers to our online technical resource which sets out the approach we generally take - taking into consideration the individual facts of each case. Given the availability of this information, it is disappointing that some insurers still insist on pursuing individual cases to the last stage of our process - an ombudsman's final decision. This can lead to delay and inconvenience for everyone involved.

travel insurance complaints

year ended 31 March number of complaints
2012 2,431
2011 2,536
2010 2,003
2009 1,973
2008 1,628
2007 1,670

annual trend: -4%%

This year saw the final conclusion to the insurance complaints that were referred to us following delays and disruption to travel, caused by ash from a volcanic eruption in Iceland in 2010.

Despite the scale of the disruption and the large number of travellers affected, we received a comparatively small number of complaints about this. Most travel insurers chose to compensate their customers on an informal goodwill basis.

A number of disputes referred to us turned on whether the volcanic ash cloud constituted "poor weather conditions" under the terms of the policy. The ombudsman made a final decision in March 2011 which illustrated many of the issues involved - and concluded that wind-borne volcanic ash could be a poor weather condition.

We expected travel insurers to use this ruling as a guide to the ombudsman's general approach to resolving these kinds of complaints. However, in June 2011 an insurance company, Europ Assistance, challenged the decision by way of a judicial review - which resulted in over 300 consumers' cases being put on hold.  

In January 2012 the High Court rejected this legal challenge, and Europ Assistance said it would resolve the remaining cases in line with the ombudsman's decision.

Many of the travel insurance disputes we see involve the challenges that chief medical officers at travel-assistance companies face in assessing medical claims - where they need to make an expert judgement on whether the claim relates to a pre-existing health condition or on what the most appropriate form of treatment should be. In these cases, we have to balance the evidence from the chief medical officer with the evidence from the consumer - as well as information from the medical practitioners actually involved in the consumer's care.

In last year's annual review we welcomed the requirement by some insurers for consumers to speak to a medical helpline when buying travel insurance. However, we highlighted our concern that this might not solve all potential problems.

In cases during the year where we listened to recordings of phone calls to medical helplines, we felt there was often a lack of clarity about the full range of health conditions that needed to be disclosed. In other cases, the consumer was asked questions about their own health - but not about the health of fellow travellers whose medical conditions could also affect the insurance cover.

health and medical insurance complaints

year ended 31 March number of complaints
2012 2,295
2011 1,754
2010 2,026
2009 1,874
2008 1,839
2007 1,959
2006 2,291

annual trend: +31%

Following a decline in the previous year in the number of disputes referred to us involving health and medical insurance, complaints about income protection and critical illness increased this year by 34% and 55% respectively. Disputes involving private medical insurance rose slightly by just 1%.

We saw more cases about income protection claims involving work-place stress - which could in part reflect the tougher economic environment, with people feeling under more pressure at work. The harder times may also account for the growing number of complaints we saw during the year involving the sale of short-term income protection policies offering unemployment cover.

In general, this is an area of insurance where we continue to have constructive dialogue with the insurers involved. For example, the health-insurance sector was well represented at a seminar we held during the year on our practical approach to health-related insurance disputes. We also took part in a number of insurance-sector events on health insurance matters.

During the year we published more details about our approach to disputes involving personal accident insurance - aimed particularly at insurers who have complaints referred to us relatively infrequently and who may not be familiar with our approach. The information we published included case studies in ombudsman news (issue 99) and more details about our approach set out in our online technical resource on our website.

what the complaints were about: banking and credit

Complaints about banking and credit made up 24% of the total number of new cases we received during the year (31.5% in the previous year). The number of new cases relating to banking and credit fell slightly by 1% - from 65,063 in the financial year 2010/2011 to 64,234 in 2011/2012.

This table shows how these banking and credit complaints were spread across different products and services.

type of complaint %
credit cards 30
current accounts 23
mortgages 15
consumer-credit products and services (eg point-of-sale loans, hire purchase and catalogue shopping) 11.5
unsecured loans 10
savings accounts 6.5
other banking services 4

credit card complaints

year ended 31 March number of complaints
2012 19,183
2011 17,466
2010 18,396
2009 18,590
2008 14,123
2007 2,731

annual trend: +10%

Disputes relating to section 75 of the Consumer Credit Act 1974 - under which the credit-card provider can be jointly liable with the supplier of the goods or services, if a consumer has a valid claim for misrepresentation or breach of contract - remain an ongoing source of complaints against credit-card providers.

Given the range of goods and services that consumers buy with credit cards, we see a correspondingly wide range of disputes involving section 75 - many concerning the quality of goods or services. Most complaints tend to involve problems with furniture, kitchen appliances, electronic equipment or holiday clubs.

Unsurprisingly, given that section 75 is a complicated piece of law, many consumers are unsure about what exactly they are entitled to ask their credit-card provider to do, if there is a problem with the goods or services they have bought with their credit card.

Although section 75 provides valuable protection to consumers, not every transaction (or problem) is covered. This means we regularly have to provide a clear explanation to the consumer about how section 75 works - something that their credit-card provider has itself often failed to do. Given that the Consumer Credit Act has now been in force for over 30 years, it is disappointing that many credit-card providers still seem to struggle to understand section 75 - and in some cases raise poorly-constructed legal arguments as to why it does not apply.

Where we are satisfied that section 75 applies, we can require the credit-card provider to pay redress under certain circumstances. Consumers and their representatives sometimes ask us to make the credit-card provider pay on a "fair and reasonable" basis, even when section 75 does not extend to the transaction. But the law does not make the credit provider liable where section 75 does not apply - and so, in fairness, neither do we.

On the other hand, credit-card providers sometimes say that, even though section 75 does apply to a particular transaction, we should not make them pay because that would not be fair to them in the circumstances of the case. This argument is also unlikely to be successful - as the law is one of the things we have to take into account when we consider cases, and we have no power to either exclude or develop the statutory consumer-credit protections.

During the year we have continued to see complaints where special credit-card "deals" have come to an end, and credit-card providers have applied the terms of the deal with little flexibility - for example, if the consumer is late with a monthly payment. Some of these disputes involve the clarity of information about when - and in what circumstances - the special deal will end. Where the consumer is experiencing financial difficulty, the dispute is likely to be about whether the credit-card provider is taking a fair approach to agreeing a payment arrangement with the consumer.

Disputes about so-called "default charges" on credit cards have featured in previous annual reviews and continue to result in a steady stream of complaints. 

As with disputed transactions involving other types of card, complaints about disputed credit-card transactions continued to form a significant part of our work during the year. Dealing with these complaints often involves our helping consumers as well as their credit-card providers better understand the rules for disputed credit-card transactions - which are different from the rules that apply to other types of card transactions.

Given the nature of these complaints, we rely on the parties to be entirely open with us and to provide all the information we ask for. This enables us to make the best possible assessment of what probably happened and, applying the relevant rules, to decide where liability lies for the disputed transactions.

current account complaints

year ended 31 March number of complaints
2012 14,595
2011 19,944
2010 25,252
2009 13,682
2008 39,263
2007 8,061

annual trend: -27%

For the third year running, we have seen a substantial number of complaints from consumers who told us that their current-account problems related to financial hardship they were experiencing - often also saying that charges applied to their current accounts had added to the problem.

It is now over two years since the Supreme Court made its decision clarifying the legal position on current-account charges. But many consumers who refer complaints to us about these charges still believe that current-account providers should limit the charges to the actual cost of the work charged for - for example, the cost of returning an unpaid direct debit.

This means we have to spend time in many cases clarifying the legal position - before we can start working on an outcome that the consumer can understand. From what we see, this problem is often caused when consumers (or their representatives) have looked at out-of-date or inaccurate information about bank charges on the internet. During the year we produced a new consumer factsheet on current-account charges which is available on our website.

Our approach to achieving a fair outcome in cases like this has remained consistent over a number of years. It normally involves arriving at a practical "package" of measures that reflects the consumer's individual circumstances and personal means. The aim is to make existing problems more manageable - and to break the cycle of charges, in order to reduce the likelihood of new charges making things worse in future.

As we have explained in previous annual reviews, this is most likely to be achieved when the consumer (or their representative) provides us with the information we ask for, and the current-account provider is responsive and constructive when we approach it with our ideas for a practical way of resolving the problem.

When we deal with cases involving financial difficulty, it is very important that the financial business is entirely open with the consumer about the implications of any proposals - for example, about what they may mean in relation to information registered with the credit reference agencies or in relation to any future limitations on the consumer's current account. If the business isn't sufficiently clear about these matters, it can result in further problems - when the consumer later realises the unexpected consequences of the arrangements they have agreed with their account provider.  

This year we have seen more complaints about so-called "packaged" accounts, where the consumer pays a monthly fee for a current account that includes some insurance products (such as travel insurance) and/or other special features (such as an automatic overdraft facility or a discounted borrowing rate). In some cases we see, the consumer says that they did not realise their old account had been upgraded to a packaged account and that they had not given their consent to this change.

As in previous years, we have continued to see a significant number of complaints about disputed card transactions in relation to current accounts. Consumers who refer cases like this to us are sometimes confused by what they may have read in the press or on the internet about what it is possible for a card fraudster to do.

We also still see some financial businesses failing to apply the relevant law and regulations correctly when dealing with these types of complaint - or providing only patchy evidence to support their case. Whatever the circumstances of the complaint, we rely on both the consumer and the financial business to be open with us and to answer our questions fully. Not giving us the evidence we need - for whatever reason - does not help either side.

This year we have seen a significant increase in the number of disputes involving the joint debts of couples who have broken up. This perhaps reflects the continuing difficult economic times - and the strain this can put on relationships. Typically, in the cases we see, an overdraft on a joint current account is incurred or increased by one or other of the partners after they have split up.

Understandably, consumers may feel it is unfair for the account provider to hold them liable for spending they did not personally incur - or liable for more than what they might see as "their half" of a debt.

The terms and conditions of a joint current account should be very clear that each of the parties will be liable for any debt on the account, regardless of which person incurred it. We also expect the account provider to take reasonable steps to freeze an account - and to avoid additional joint debt being run up on it - once it has been told about a couple's separation. As the circumstances leading up to this type of situation are usually sensitive and complex, we look at each case individually to see what we believe is the fair outcome.

complaints about mortgages

year ended 31 March number of complaints
2012 9,537
2011 7,067
2010 7,469
2009 7,602
2008 6,824
2007 4,366

annual trend: +35%

The number of mortgage-related complaints referred to us by consumers increased by over a third during the year. The complaints generally continued to involve the types of issues that we have seen in this area over the last few years. Many of these issues reflect the economy and the state of the mortgage market as a whole.

Administrative errors remained the largest area of complaint. We also saw an increase in the number of cases involving an element of financial hardship.

Complaints about the handling by lenders of mortgage arrears continued to form a significant part of our work. This included complaints about arrears charges applied by some lenders - and complaints about the inflexibility of lenders in arriving at a plan to manage the arrears in a way that fitted the consumer's circumstances. 

Sadly, our work included some cases where the consumer's circumstances had deteriorated to the point where there was no practical way in which they could maintain the mortgage - and where there was no expectation that things would improve in the future. In cases like this, there may be a limit to the period over which the lender can continue to exercise "forbearance". And once the lender has exhausted all other options, the consumer may have to reconcile themselves to the loss of their home. 

Consumers in this position sometimes hope that we may be able to persuade or order the lender to allow them to stay in their home - and we have to explain at an early stage of the complaint that we are unlikely to be able to do that. In particular, as a service set up to resolve complaints, there is little real help we can provide where the lender has already obtained a "warrant for possession" for the property from the Court.

However, we are able to look at complaints about how the lender has dealt with the arrears and treated the consumer. Where the likely outcome is that the property will be repossessed, we would expect to see the lender take particular care to ensure that the consumer is adequately supported - and provided with the necessary level of information and quality of communication - to make the process no more upsetting than is absolutely necessary.

Cases involving the sale by lenders of repossessed properties remained a small part of our work during the year. These cases continued to raise difficult and sensitive issues - often relating to poor communication by the lender.

We also continued to see complaints involving administrative problems such as delay - as well as disputes over the price obtained for the repossessed property and the level of charges applied to the mortgage account by the lender.

A number of cases during the year involved claims-management companies referring complaints to us on behalf of consumers about the sale of past mortgages. As with all disputes like this, we expected both sides in these complaints to make a reasonable effort to provide us with evidence to back up their case.

In some of these complaints, the sale in question had taken place before October 2004 - when the regulatory framework changed for mortgage brokers, who came under the FSA for the first time from that date. In each case, we looked at the dispute in the light of the rules that were in place at the time of the events complained about. 

We saw fewer complaints during the year from consumers whose application to "port" their existing residential mortgage (in other words - transfer it to a new property) had been turned down. However, we saw more complaints involving new mortgage applications - or switches to new mortgage products - where the difficult mortgage market meant that consumers had problems meeting the necessary "loan-to-value ratio" for the new mortgage they wanted.

We also saw more cases where consumers were disappointed when their own lender's reduced range of available mortgages made it necessary for them to move to another lender, in order to get a mortgage at a better rate. As we have highlighted in previous years, complaints about being turned down for a mortgage often also include dissatisfaction with the explanation - or lack of explanation - that the lender gave about why the mortgage application was not successful. 

We continued to see disputes about decisions by lenders to reduce significantly the upper age-limit applying to the term of a mortgage - or to require the consumer to provide proof of their income in retirement (or to show how they intended repaying the mortgage after they retired).

Letting - rather than selling - their mortgaged property is an option that some consumers are considering in the current property market. We saw complaints during the year from consumers who either wanted or needed to let their property - and were unhappy with the increased interest rate or administrative charges that their lender applied as a condition of agreeing to the letting.

Some complaints were from consumers who had previously been allowed by their lender to let their properties without much formality and with no additional charge - and were unhappy that their lender had moved to a more formal approach.

complaints about consumer credit

year ended 31 March number of complaints
2012 7,416
2011 7,250
2010 6,329
2009 3,014
2008 849

annual trend: +2%

We have seen a steady rise in the number of complaints about consumer credit since April 2007, when the range of credit-related complaints we cover was extended by law - to cover consumer credit provided by all types of lenders, as well as other regulated consumer-credit activities, such as hire purchase and catalogue shopping.

Given the tough economic times, it is perhaps not surprising that many of the complaints we handled during the year involved problems stemming from financial difficulty. For example, we continued to see a rising number of complaints from consumers who had used the services of fee-charging debt-management businesses (who liaise with the consumer's creditors and agree and administer payment plans for them).

Complaints involving debt-management businesses were generally about their administration of a payment plan - or about the level of fees they charged for their service, which the consumer did not feel had been made clear to them at the outset. Because these consumers were already in financial difficulty - often in relation to a range of creditors - poor service by the debt-management business could have a particularly serious impact on them.

As we highlighted in our previous annual review, we also see complaints involving debt-management businesses that had offered to act on the consumer's behalf in bringing a claim against the consumer's creditors. In these cases the consumer usually complains to us that they were not sure exactly what the business was undertaking to achieve for them as part of their debt management package - or what they were getting for the money they were being asked to pay.

During the year we saw a 12.5% rise in the number of complaints about debt-collecting businesses. In these cases, the consumer generally complained about poor administration, heavy-handed collection techniques (often involving phone calls), or being chased for someone else's debts because the debt collector had confused their identity with that of the person who actually owed the money.

Complaints about credit broking also continued to form a significant part of our work during the year. In most of these cases, it was not clear what steps - if any - the credit broker had taken to try to source credit for the consumer, in return for the up-front fee the consumer had paid. We also saw complaints that credit brokers had taken fees that the consumer had not authorised - often using debit-card details that the consumer had been asked to provide for "identification purposes".

In our previous annual review, we highlighted a rise in complaints about point-of-sale loans that consumers had taken out to pay for goods or services such as training courses and holiday-club memberships. These are loans arranged through the provider of the goods or services - and can be used only to finance a specific purchase. Because of the underlying arrangements between the lender and the provider of the goods or services, for loans of this type the consumer may potentially have a claim against the lender - if there is a problem with the purchase - under section 75 of the Consumer Credit Act 1974.

We have continued to receive similar complaints about point-of-sale loans this year. In many cases, the consumer complains that the company that was meant to provide a training course has gone out of business - and the consumer does not feel that a suitable alternative has been provided. Consumers also continue to refer complaints to us about holiday-club memberships that have not turned out as expected or, in the case of some older consumers, had not been affordable for them from the outset.

Point-of-sale loans are also a popular way of buying new and used motor vehicles. And during the year we continued to see complaints about the quality of vehicles supplied. Because of the expectations of everyone involved in these disputes, these cases are often particularly challenging for us to resolve.

The credit providers involved can be reluctant to accept that they have any liability in the matter at all - or they are unwilling, even in the face of supporting evidence, to accept that there is anything wrong with the vehicle. Consumers, on the other hand, are sometimes reluctant to accept that minor mechanical problems with used vehicles - if put right reasonably promptly by the supplier - are not a reason to return the vehicle and get their money back. 

During the year we also began to see a rise in the number of complaints involving short-term finance - often called "pay-day loans". We had previously received relatively few complaints about this type of lending - 59 cases in 2010/2011, rising to 296 in 2011/2012. In many of the cases we saw during the year, the complaints involved the way in which the lender had operated the payment authority given to them by the consumer.

complaints about unsecured loans

year ended 31 March number of complaints
2012 6,262
2011 5,820
2010 6,285
2009 4,242
2008 2,940
2007 1,755

annual trend: +8%

During the year we continued to see a significant number of complaints from consumers who were experiencing financial difficulty - and who did not feel their lenders had treated them fairly.

In some cases, when lenders responded to customers in financial difficulty, they still relied too much on inflexible standard approaches. This is something we commented on in last year's annual review. However, we also saw cases where consumers were unwilling to be flexible about the arrangements they were prepared to agree with their lender - often focusing solely on getting the debt written off completely, rather than on agreeing an affordable and workable way forward through their difficulties.

When assessing what would be fair treatment for the consumer in these cases, we take account of their individual circumstances - in keeping with our established approach to these kinds of complaints.  

We also continued to receive complaints from consumers who were paying interest on loans on a variable-rate basis - and who could not understand why their interest rate had remained so high in relation to the historically-low Bank of England base rate.

Understandably, these consumers supposed that their lenders were unfairly making a much-increased profit on their loans. Having obtained the relevant information from the lenders involved, we were able to explain to the consumers why their lenders' cost of funding was not as low as they had assumed. However, in many of these cases the lender had not given their customer a clear explanation about this when they first dealt with the complaint. This could have prevented these misunderstandings escalating to the stage where the ombudsman service had to get involved.

As in previous years, we continued to see some cases where consumers argued that their loan agreement was "unenforceable at law". Unfortunately, many of these complaints were based on inaccurate or out-of-date information. The ombudsman service has no legal power to declare a loan unenforceable in court. Only a court can do that. This means we may not be the most appropriate forum for complaints based solely on this point.

During the year we received a number of complaints from consumers who had signed up for loans given to members of their family. These consumers generally believed they had acted as "just" the guarantor for the loan, rather than as the borrower - and so they did not think they should be asked to pay when the borrower defaulted. These cases highlight the considerable potential risks of standing as a guarantor for someone else's loan - which, for most consumer credit loans, means being liable to pay if the borrower fails to do so.

complaints about savings accounts

year ended 31 March number of complaints
2012 4,286
2011 4,783
2010 5,033
2009 5,183
2008 2,675
2007 1,438

annual trend: -10%

As in previous years, many of the complaints involving savings accounts that we saw during the year were about poor administration by some savings-account providers - including delays and errors in opening accounts and in transferring balances between providers.  

Consumers also complained to us in cases where they felt savings-account providers had not given them clear enough information about the end of fixed-rate or bonus deals. In particular, some consumers complained that their savings-account provider had not given them the necessary reminder about the end of their bonus-rate period - after which their account reverted to a much lower rate, unless they took action to move their money to a better product.

In these cases the savings-account providers in question suggested - wrongly in our view - that the payment-services rules excused them from providing the reminder that was required under the FSA's banking "conduct of business" rules.

During the year we also saw complaints about "guaranteed equity bonds" - a type of savings bond where the capital is protected but any returns depend on the stock market or some other investment index. These products are often sold following advice or a recommendation. But they do not fall under the rules for selling investments, because technically they are classed as deposit-based products rather than as investments

The complaints we saw often involved bonds which were taken out in 2006 and 2007 - and which matured yielding no return. We found consumers and savings-account providers alike to be unclear about the rules setting out how these products should be sold. Consumers often wrongly supposed that they should have been taken through a full "fact find" before they were sold the product - which is required for the sale of investments.

Savings-account providers, on the other hand, often forgot that even so-called "non-advised" sales had to be carried out with reasonable care and skill - and that they were responsible where encouragement or recommendation was given to a consumer to take out a particular product.

Because traditional savings accounts are not as attractive to consumers in today's low interest-rate environment, savings-account providers are designing - and consumers are taking out - more complex products than in the past. These products are resulting in slightly different complaints from those we have traditionally seen in this area. This is sometimes because neither the consumer nor the member of staff they dealt with at the provider is entirely certain about how the savings product is designed to operate. 

complaints about other banking services 

year ended 31 March number of complaints
2012 2,955
2011 2,733
2010 2,987
2009 2,725
2008 2,643
2007 1,748
2006 1,360

annual trend: +8%

During the year our work continued to include cases involving the faster payments service - for payments over the internet and by phone. These complaints generally related to transactions that had not been processed as "faster payments" - or situations where the consumer felt the payment service provider had not given them an adequate explanation about the faster payments service and what it meant in practice.

We also continued to see complaints about payments made through specialist payment services - in relation to payments made both within the UK and from the UK to international destinations. These complaints often involved the release of payments to third parties who were not entitled to them. Consumers also referred complaints to us about wrong or inadequate information they had been given on how the payment service worked.   

We continued to receive complaints about the costs, time scales and procedures involved in international money transfers. When problems occur with these transfers, a regular source of confusion for many consumers is the use by their UK bank of an overseas intermediary bank - or so-called "correspondent" bank - for arranging payment to a foreign "beneficiary" bank, with which the UK bank had no direct business relationship. In many of the complaints we see, these arrangements have not been clearly explained to the consumer by their bank.   

In last year's annual review we mentioned complaints about payments that had been "misapplied" because of a mistake by the person sending the money - for example, by entering the wrong account number on a transfer form or in an online transaction. We continued to see complaints about this during the year. In the cases we saw, the problem had been made more immediate by the more streamlined payments systems - that mean there is less opportunity for payments made in error to be retrieved before they reach their destination.

In some of these cases, we decided that the financial business sending the payment for the consumer - when alerted by the consumer to the error - had not made sufficient effort either to stop the payment reaching its destination or to recall the payment from the financial business that had already received it. However, with this type of complaint the very individual circumstances that apply in each case mean there is a varied range of outcomes.

what the complaints were about: investments and pensions

Complaints about investments and pensions made up 6% of the total number of new cases we received during the year (7.5% in the previous year). We received 14,862 investment and pension-related cases - 4% fewer than in the previous year.

While pension-related complaints rose by 28%, and complaints about whole-of-life policies and savings endowments increased by 26%, complaints about stockbroking fell by 38% and cases involving derivatives declined by 32%.  

This chart shows how these investment and pension-related complaints were spread across different products and services.

type of complaint %
whole-of-life policies and savings endowments 27.5
mortgage endowments 21.5
personal pension plans 12
portfolio management 7.5
investment ISAs 6
unit-linked bonds 5.5
stockbroking 4.5
small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 3.5
"with-profits" bonds 3.5
annuities 3
guaranteed-income bonds 2
SERPs 2
derivatives
(including spread-betting)
1.5

complaints about whole-of-life policies

year ended 31 March number of complaints
2012 4,186
2011 3,328
2010 4,199
2009 3,515
2008 3,211
2007 3,734
2006 4,163

annual trend: +26%

As in previous years, we continued to see a significant number of complaints during the year about so-called "reviewable" whole-of-life policies - where reviews carried out by businesses, some years after the policies had been taken out, revealed that the original assumptions (particularly in relation to investment returns) had not been met. The consumers in these cases were unhappy that they now faced either a reduction in their life cover or an increase in their premiums.

When we decide these cases, a key consideration for us is the prominence of information that was given to consumers at the outset - warning that this type of policy would be subject to review and explaining what this could mean for the consumer.

Where we uphold complaints in relation to whole-of-life policies, the redress can range from our telling the business involved to refund premiums paid by the consumer (with or without a deduction for life cover) to telling the business to provide guaranteed cover (or cover on another basis). 

complaints about pensions

year ended 31 March number of complaints
2012 3,454
2011 2,706
2010 3,594
2009 4,825
2008 5,297
2007 3,687

annual trend: +28%

Long-running disputes are a feature of many of the investment-related cases we deal with - especially in the pensions area. During the year we saw a rise of over a quarter in the number of pension complaints referred to the ombudsman service. Most of these cases involved complex issues, legal argument and entrenched positions.

Many of the pension disputes we see also arise at a point where the consumer is just about to retire and become dependent on their pension - or is already retired and needing their pension income. This means that delays and uncertainty can create more financial problems for them - and possibly financial hardship.

30% of pension disputes require an ombudsman's final decision - as the last stage of our complaints process. Where we are not able to resolve complaints at an early more informal stage - especially where businesses challenge our decisions through extensive legal representations - consumers may have to wait a considerable time before their case is resolved. 

Pension complaints also frequently have very large sums of money at stake. During the year the maximum amount that the ombudsman can tell a business to pay in compensation was increased from £100,000 to £150,000 - for new complaints we received from 1 January 2012. Businesses may agree to settle any recommendation we can make above this level - but the recommendation itself is not legally binding on them.

The historically-low Bank of England base rate means that annuity rates are also very low. This is very significant for people on annuity-based pensions - and we continue to see disputes where alternative pension arrangements have been taken out instead, resulting in the consumer facing greater investment risk.

In many of these cases the problem could have been avoided if the consumer had been given clear information about the important decisions they had to make.

During the year we also continued to see pension-related disputes where the underlying problems resulted from administrative errors involving miscalculations. Once we had identified the cause of these complaints, the businesses involved generally accepted their liability without further dispute. However, it is disappointing that these cases were resolved only after they had been escalated to the ombudsman service - and had not been sorted out much earlier by the business itself.

complaints about investment-linked products

year ended 31 March number of complaints
2012 3,308
2011 3,784
2010 6,329
2009 5,798
2008 2,750
2007 3,644

annual trend: -13%

The number of investment-linked complaints referred to the ombudsman service tends to rise when stock markets fall - as consumers suddenly see problems with an investment that they had thought was safe. On the other hand, when markets rise - as they have this year - investments are more likely to perform in line with consumers' expectations, and so fewer people complain.

However, in last year's annual review we highlighted the fact that growing numbers of disputes about investment-linked products were becoming increasingly entrenched and fiercely contested. And disappointingly, this is a trend we have seen continue during the year.

Many of these disputes involved major financial institutions and large sums of money - often very much more than the maximum amount we are able to tell businesses to pay as compensation to individual consumers.

The legalistic approach to complaints handling now being taken by some of these businesses and their legal advisers has caused significant delay during the year to the final resolution of cases. This has meant we have needed to ask the consumers involved to be patient - while lengthy legal arguments have been exchanged.

A significant number of these cases continued to involve consumers who were unhappy that they had invested in products carrying greater levels of risk than they had anticipated. They complained to us that the underlying investments had failed to match the descriptions they were given when they took them out.

In some instances we found that highly unsuitable products had been sold to elderly and inexperienced investors. We raise these matters with the FSA, the regulator, where appropriate. We also continue to see disagreements between consumers and businesses about what investments should make up a "high", "balanced", "low" or "no risk" portfolio.

Various complex issues arose during the year in cases where the parties made legalistic arguments about "causation" - in the context of disputes over losses in relation to advice on investments.

In arriving at decisions based on what the ombudsman believes is fair and reasonable in the circumstances of each individual case, we take the law into account - as well as other matters, such as relevant good practice. A number of high profile cases were referred to the ombudsman service where these issues were raised, and the ombudsman made provisional and final decisions on these investment-related cases - which we published on our online technical resource.

During the year we continued to liaise with the FSA, where it was working with businesses to put right problems for groups of consumers who had not necessarily referred investment-related complaints to the ombudsman.

complaints about mortgage endowments

year ended 31 March number of complaints
2012 3,267
2011 3,048
2010 5,400
2009 5,798
2008 13,778

annual trend: +7%

In last year's annual review we reported that the number of mortgage endowment complaints had continued to fall. This year, however, the number of cases increased slightly - by 7% to 3,267 - for the first time since 2004/2005.

At the peak of complaints about mortgage endowments, in 2005, we were receiving up to 1,500 cases a week. So the current volumes are still very low by comparison and now represent just 1.2% of our overall workload - from a peak of 63% in 2005.

However, mortgage endowments still remain one of the most complained-about investment products. And for many people referring complaints to us, the real difficulties caused by mortgage "shortfalls" are now starting to bite - as endowment policies they took out in the mid to late 1980s, to repay their mortgage, are now maturing.

We are now unable to look at many of these cases, because the time limits set by the FSA have already expired. These time limits were very widely publicised in campaigns throughout the mid 2000s - which included millions of so-called "re-projection letters" being sent out to consumers, warning of possible shortfalls on mortgage endowments.  

As a result of these campaigns, very large numbers of consumers took action between 2002 and 2007 - to deal with any potential shortfall when their endowment policies matured. This included making complaints - and being paid compensation where appropriate.

However, we still anticipate a rise in mortgage endowment complaints in the next few years - as the substantial numbers of endowment policies that were sold with 25-year mortgages in the 1980s start to mature, leaving consumers confused and disappointed.

Mortgage endowment complaints referred to us sometimes involve concerns that funds have been mismanaged by businesses. This usually happens when stock market rises do not appear to be reflected in endowment fund values. We do not generally look at these types of complaint, as fund performance normally results from the legitimate exercise of businesses' commercial decisions.

complaints about stockbroking and portfolio management

year ended 31 March number of complaints
2012 1,842
2011 2,267
2010 2,474
2009 2,078
2008 1,209
2007 1,052

annual trend: -19%

During the year there was an overall decline in the number of complaints referred to us about stockbroking and portfolio-management issues. This could reflect the fact that market conditions during the year may not have been as subdued as anticipated.  

However, we saw more complaints involving so-called Unregulated Collective Investment Schemes (UCIS). These cases generally involved larger amounts of money. They also frequently related to funds that have been suspended - or have already failed - so the losses can be large.

In the complaints referred to us, the information provided by businesses has often revealed unsatisfactory record keeping and poor evidence about the classification of the funds. The businesses in question sometimes appear to have little understanding of how these funds - which may include overseas property and investments such as forestry plantations - should be marketed only to restricted classes of investors and not to consumers in general.

We have also seen cases where consumers eager to take advantage of what seemed to be an exciting investment opportunity - at a time when returns on traditional savings and investments were disappointing - have not always taken the time to reflect on the risks involved.