Commentary from our chief ombudsman and sector-by-sector insight into trends in complaints.
Caroline Wayman, our chief ombudsman and chief executive, shares her thoughts on the headlines from our annual data, looking back over 20 years of the Financial Ombudsman Service.
Our annual complaints data, which we’re publishing today, is an opportunity to look both backward and forward. Backward because the problems we see reflect how people have been managing, and feeling about, their finances over the last year. Forward because these themes and trends aren’t just interesting: they contain vital lessons about what fairness looks like and how disputes might be prevented.
new complaints received in 2019/20
complaints resolved in 2019/20
In the 20 years we’ve been established, we’ve resolved more than 3.8 million complaints. This year alone, we gave our answer to well over a quarter of a million. That’s more than a quarter of a million individual questions of fairness – each involving a life or livelihood that had been affected, or even put on hold, because of a financial dispute.
Of course, this has been a year like no other. I think it’s safe to say that, at the beginning of 2019/20, no one could have predicted how it would end. As I write, we’re running our service almost completely remotely – in common with most other organisations that have needed to adapt as best they can in response to the rapid and significant impact of Covid-19.
Read more from Caroline
Our year in review
While the pandemic now looks set to shape life for the foreseeable future, for the best part of the last year most of us hadn’t even heard of Covid-19. As we looked ahead in April 2019, we were expecting to be incredibly busy in the run-up to the Financial Conduct Authority’s (FCA) deadline for payment protection insurance (PPI) complaints.
Following a significant amount of preparation, we were also standing ready to investigate complaints from customers of claims management companies (CMCs), which were newly-regulated by the FCA. And in a further extension of our remit, our new dedicated small business team – led by specialist ombudsmen and supported by external expertise – was ready to resolve complaints from more small and medium-sized enterprise (SME) customers of financial services.
Nearly a decade after we started to see PPI complaints in mass volumes, it remains the single largest product driving complaints to us. The FCA’s deadline for complaining about PPI, which fell on 29 August 2019, marked the beginning of the end for this episode of mass mis-selling.
However, the end is still some way off. Following the deadline, it became clear that businesses had received millions of PPI enquiries – with some indicating it would be summer 2020 before they’d be able to respond to some customers. This means that many referrals to our service will come later than we originally expected – well into the 2020/21 financial year, rather than in 2019/20.
Even so, during the year we resolved 123,380 PPI complaints. And in doing so, we found that, encouragingly, businesses had reached fair outcomes in a greater proportion than the previous year. It’s essential that this trend continues: the actions of businesses, as well as CMCs, will be crucial factors in how efficiently we’re able to bring PPI to a conclusion.
We resolved 123,380 complaints about PPI
PPI uphold rate in 2011/12: 82%; this year 17%
Before Covid-19 was on our horizon, we’d also been hearing from tens of thousands of people struggling with unmanageable levels of debt. During a year when we saw yet more lenders sink under the weight of past unfairness, we continued to raise concerns with firms in this sector about the disappointing proportion of cases where they’d failed to ensure customers’ borrowing was affordable and sustainable.
Some short-term lenders’ slowness to engage with a fair approach to complaints – and indeed, to make it easy for customers to raise concerns – is reflected in the persistent level of CMC activity in this area. It’s time now for these lenders to genuinely prioritise customers’ long-term interests. The potential for borrower vulnerability in the wake of Covid-19 means this isn’t just important, but essential.
Payday loan uphold rate: 70%
In other areas too, we needed to step into disputes that could and should have been prevented. This time last year, we highlighted the growth in complaints from victims of increasingly sophisticated fraud and scams. From May 2019, a voluntary code has offered protection for people who unwittingly transfer money to criminals.
While this development is welcome, it’s clear there’s still some way to go before the code is embedded and applied consistently. We recognise the tension between preventing fraud and the speed of payments. We’ll continue to support firms to do the right thing by their customers – sharing our insight to help to prevent this type of crime happening, and to ensure fair outcomes where it does.
In our new areas of responsibility – complaints about CMCs and those brought by SMEs –our dedicated teams handled gradually increasing volumes of complaints over the course of the year. In addition to investigating complaints in-depth, our SME teams provided a significant amount of additional support to SME customers – helping to resolve problems informally, and signposting to other sources of help and advice. We’ll continue to work hard to deliver fairness in these as-yet small but significant parts of our remit – with an eye in particular to Covid-19’s implications for SMEs that now have recourse to us.
A different type of crisis
Our history has been shaped by mass-scale complaints, and punctuated by a financial crisis. Each has been rooted in systemic problems with businesses’ behaviour. Together, they contributed to a crisis in trust. While there are signs this has begun to mend, progress has been slow and fragile.
The current situation is different. Unlike those mass issues, and the 2008 crash, financial businesses’ conduct didn’t contribute to Covid-19’s outbreak. In what’s an awful situation in so many respects, one positive might be the opportunity to accelerate the rebuilding of customers’ trust and confidence.
So how can we make that happen?
In the last two decades, the way we interact with financial services has changed substantially – primarily driven by technology that’s enabled both new products and new platforms. Twenty years ago, for example, we’d never handled a complaint about an insurance policy bought online.
What’s striking, though, is that the fundamentals of good customer service – and relatedly, good complaint handling – have remained the same. We know that clear communication matters – which includes how customer concerns are engaged with. And we know that empathy also matters – the willingness to see things from a customer’s perspective, and to acknowledge how they’ve been affected by the issue they’re having.
Many financial businesses know and do this already. For the rest, there’s never been a better time to start putting fairness first – and we’re here to support them to do that.
Building on the best of what we’ve got
The unprecedented Covid-19 situation has already given rise to many new and complex questions of fairness. The answers will have wide-reaching and long-lasting consequences for individuals, families and businesses across the UK.
We don’t yet have all the answers. But, at this strange and incredibly difficult time, I think we have the tools and experience we need to find them.
We have a regulatory framework that’s rooted in principles of integrity, trust and the customer interest. We know the enduring power of clear communication and empathy. And where disagreements can’t be resolved, we have a heritage of alternative dispute resolution. Not reaching answers through an adversarial pitting of one side against another, but using pragmatic problem-solving and common sense to find a fair way forward.
We know there are high expectations of us. Alongside this annual data, we’re also publishing our strategy for the next five years. This sets out our commitment to ensuring we’re providing the best service we possibly can for the people who are relying on it.
We’ll continue to use trends and insights from the complaints we see to help shape our future service. However – and while we’ll always stand ready to help people who need us – we shouldn’t let past mass claims skew our sense of what’s acceptable. No-one should be comfortable with the current volume of our casework.
So a further key part of our strategy is to build on the work we already do to proactively prevent complaints. That means not just resolving disputes that are brought to us, but working with others to stop unfairness arising in the first place.
I know that financial businesses support this ambition, recognising the benefits for themselves and their customers. And despite the extraordinary circumstances we’re in, and the scale of the challenges ahead, I’m cautiously optimistic about the future.
By applying the lessons of the past – and drawing on its strengths – the financial services sector will weather Covid-19. And even though things may never be the same again, the crisis is a chance to refocus on what really matters, and to recommit to fair outcomes.
At the beginning of our third decade, we’re ready to play our part.
Overall trends for the year
Consumer enquiries: 642,556
New complaints: 271,468
Resolved complaints: 295,596
Number of ombudsman’s decisions: 29,746
Biggest single product: PPI (122,153)
Highest uphold rate: guarantor loans: 89%
Insight by sector
Payment protection insurance (PPI)
New complaints: 122,153
Resolved complaints: 123,380
Uphold rate: 17%
- The FCA’s deadline for complaining to businesses about PPI was 29 August 2019. Following our consultation on our plans, we anticipated we’d be handling up to 250,000 new cases – reflecting the significant amount of complaints the deadline might generate. Partly because of the huge number of complaints that businesses received in the weeks before the deadline, we haven’t yet seen as many complaints as we expected.
- After the deadline, consumers could no longer complain to their PPI provider except in exceptional circumstances. Following a complaint, businesses have eight weeks to give their final response – and consumers then have six months to bring their complaints to us. We also saw a 24% increase in complaints around the time of the deadline, and afterwards, a 54% spike in enquiries from consumers who’d either had a response from the business or hadn’t yet received one. The majority of complaints continued to come to us via CMCs.
- However, businesses have reported they were working through millions of customer enquiries and complaints, and have told the FCA that it will be summer 2020 before they’re able to give some customers a response. Consumers then have up to six months to complain to us. We and the FCA have encouraged consumers to wait for businesses to respond, even if this takes longer than the usual eight weeks, as it’s likely they’ll get an answer more quickly this way.
- Towards the end of the year, we saw PPI enquiries fall significantly as consumers and businesses’ attention shifted to the immediate priority of managing the impact of Covid-19. We will be keeping in close touch with the FCA and businesses to understand how 2020/21 is likely to develop.
Banking and credit
New complaints: 103,070
Uphold rate: 50%
Most complained-about product:
Current accounts (20,571 complaints)
Trends we saw this year:
- This area of our work covers a wide range of products and services – from current accounts to pawnbroking. This year we didn’t see so many complaints arising from IT glitches, which had led to spikes in 2018/19 – meaning overall, volumes of complaints were lower.
- However, we continued to hear from people who’d fallen victim to banking fraud and scams. Following a 40% increase in these complaints in 2018/19, when we saw 12,195, in 2019/20 we received nearly 11,000. This was despite the introduction in May 2019 of a voluntary code offering protection for victims of “authorised push payment” (APP) fraud. We recognise the difficulties of balancing security with maintaining convenience, but are continuing to see that some businesses aren’t going far enough to prevent fraud, or are relying too heavily on generic warnings about it. We want to see businesses commit to ongoing learning and improvement for the future.
- Across the year, and before Covid-19, we saw an increase in complaints from people who’d made claims under Section 75 of the Consumer Credit Act for cancelled flights and holiday bookings. Many arose after two large UK travel companies, Thomas Cook and Flybe, went into administration.
- Over the last few years we’ve seen consistently high uphold rates for payday and instalment loans. This remained the case across several high-cost short-term credit products, with some lenders still failing to follow our established approach to these complaints. A particular theme of complaints was the affordability of borrowing, and during the year we continued to engage with lenders about how to ensure fair outcomes. The overall volume of complaints was lower than last year due to a number of short-term lenders going into administration.
New complaints: 32,637
Uphold rate: 30%
Most complained-about product:
Motor insurance (9,690)
Trends we saw this year:
- Insurance complaints remained relatively steady throughout the year, and overall we received fewer new complaints than in 2018/19, although we did see complaints following two big storms in the earlier part of the year.
- We published our insight on “misrepresentation” in insurance – an issue we’ve seen in our casework for many years. In particular, we explained that not giving insurers the right information could leave consumers underinsured and significantly out of pocket when a claim isn’t covered. We also highlighted the importance of insurers asking clear questions to ensure they get the information they need to make fair decisions. We shared our insight with both insurers and consumers – with our advice for preventing complaints receiving national and local media coverage.
- As in consumer credit, our insurance casework was influenced by changes in the market: for example, at the beginning of the year we saw a spike in commercial vehicle insurance following the entering into administration of an insurer that provided black cab policies.
- While new travel insurance complaints were down 30% year-on-year, they still represented a large part of insurance casework. As in banking and credit, only a handful of Covid-19-related complaints reached us before the end of March 2020, and from the contact we’ve had so far from people looking for relevant information, we expect to see more in 2020/21.
Investments and pensions
New complaints: 10,920
Uphold rate: 29%
Most complained-about product:
Trends we saw this year:
- Self-invested personal pensions (SIPPs) remained the largest product in this area of casework, with complaints including disputes over due diligence.
- We continued to hear from people affected by trouble with investment platforms. We had complaints from people who’d had problems accessing and managing their investments – in some cases affecting their income payments or pension withdrawals. We also continued to see portfolio management complaints.
- During the year a prominent story in the investments sector was the suspension of the high-profile Woodford fund. We received complaints against the fund itself, as well as complaints against investment platforms and financial advisers relating to portfolios including the fund and advice to invest in it. These included disputes over whether people had been wrongly encouraged to invest in the fund, having had the ongoing situation misrepresented to them.
- We worked closely with the FCA to address concerns raised by and on behalf of members of British Steel’s pension fund, with our executive team and ombudsmen taking part in several local events in Port Talbot to speak to those affected, as well as to local financial advisers. We also went to Scunthorpe and attended an event in Parliament with MPs and steelworkers.
- Following the 2016 Financial Advice Market Review, we’ve published a number of extra sets of data relating to complaints involving financial advisers. We saw a reduction in the number of complaints about independent financial advisers (IFAs), and uphold rates against IFAs were lower than last year in many areas. We also saw fewer new complaints about events that happened more than 15 years ago. In more than half of cases we resolved that would have been caught by a 15-year “longstop”, we didn’t consider the merits – for example, because they were caught by our existing 6 and 3-year time limits.
Small and medium-sized businesses (SMEs)
New complaints: 215
Uphold rate: included within other sectors’ figures
Most complained-about products:
Trends we saw this year:
- We’ve been able to handle financial complaints from more small and medium-sized enterprises (SMEs) since 1 April 2019, and the number we’ve been asked to investigate has increased steadily over the year. Early on, we saw complaints from business customers who were eligible in size, but whom we unfortunately couldn’t help because the event they were complaining about occurred before 1 April 2019.
- We saw complaints from a wide range of small businesses, including restaurants, shops, and consultancies. Some of the larger SMEs came to us with very similar complaints to some of the smallest, showing that businesses struggle with similar issues regardless of size.
- While some of the complaints we’ve seen from SMEs have been more complex in their nature, we’ve also seen that many business customers face a lot of the same problems as individual consumers. But the impact of such issues is often more severe – costing businesses valuable time and resources to put right.
- The team handling complaints from SMEs received around 1,000 new contacts through its dedicated helpline, and helped to explain the process for making financial complaints, and how the ombudsman service works.
Claims management companies (CMCs)
New complaints: 1,558
Uphold rate: 42%
Trends we saw this year:
- This was the first year that our service has been able to consider complaints about claims management companies (CMCs) – having taken over responsibility from the Legal Ombudsman (LeO) when CMC regulation transferred to the FCA on 1 April 2019.
- Claims linked to PPI made up the largest part of our CMC casework, with key themes being fees, delays and communication. After the 29 August 2019 PPI deadline, we started to hear from consumers who told us their CMC hadn’t made their PPI complaint to their bank before the deadline – meaning that their claim couldn’t be considered. This was reflected in the increase we saw in complaints in the second half of the financial year.
- We also heard from people raising concerns about being scammed by CMCs that were either acting as fraudulent “clone firms” or without authorisation. Some of these people had paid upfront fees on the promise of receiving substantial redress for mis-sold PPI, or been offered gift cards that didn’t materialise. We're not authorised to look into these issues, but we feed this type of information back to the FCA.
- We’ve seen increasing numbers of complaints linked to accident management claims, many of which involve consumers who’ve been in a non-fault car accident. Their insurer may appoint a claims management company to deal with their claim on their behalf and work with the third party’s insurer to get their car repaired. We’ve helped support accident management firms through this change, and ensure they’ve been consistent in their complaints handling.