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annual review 2007/08

1 April 2007 to 31 March 2008

how we dealt with the complaints

number of cases we resolved

year ended
31 March
cases resolved
2008 99,699
2007 111,673
2006 119,432
2005 90,908
2004 76,704
2003 56,459
2002 39,194

different approaches in different cases

Our aim is to take as flexible and pragmatic an approach as possible to the process of resolving complaints - using the dispute-resolution tools most appropriate to the individual circumstances of each case. Our approaches include:

  • An adjudicator settling a dispute informally - through mediation and recommended settlements. This might involve negotiating a constructive way forward - satisfactory to both sides - without seeking to apportion any blame for what may have gone wrong in the past between the business and the consumer.
  • An adjudicator issuing an "adjudication" - a more formal document setting out our recommendations as to whether the complaint should be upheld.
  • An ombudsman carrying out a review and making a final decision - where the earlier informal intervention by an adjudicator hasn't settled the dispute. A decision by any of our panel of 37 ombudsmen is final - it is the last stage of our dispute-resolution process.

We resolved a total of 99,699 cases in the 2007/08 financial year - including 29,484 mortgage endowment complaints. More than nine out of ten of these cases were settled informally by our adjudicators - without the need for formal ombudsman decisions.

We resolved 11% fewer cases than in the previous year. This reflected the fact that, during the year, our adjudicators were able to settle significantly fewer mortgage endowment complaints at the earlier, more informal, stage of our dispute-resolution process. An increasing proportion of the most disputed mortgage endowment cases were referred to our ombudsmen for official final decisions.

The number of mortgage endowment disputes that could be settled only by formal decisions by our ombudsmen more than doubled in the year - increasing to 3,705 cases (from 1,802 in the previous year).

The number of cases we were able to resolve and close was also affected by the fact that in July 2007 we put on hold around 14,000 current account disputes about charges incurred when an overdraft limit is exceeded. We did this while awaiting the outcome of legal proceedings brought in the High Court by the Office of Fair Trading (OFT) and a number of current account providers.

outcome of cases

In each case we settle, we record how the final outcome - after our involvement - compared with the position the business took when it issued its final response to the consumer's complaint. This means we record:

  • either that "we agreed with the consumer's complaint", where the business had failed to accept that it had done something wrong, or had failed to offer sufficient redress;
  • or that "we agreed with the business's response", where the business had done nothing wrong, or where it had originally done something wrong but had later offered sufficient redress - even if the explanation it gave the consumer had been poor.
banking and credit complaints we agreed with the consumer's complaint we agreed with the business's response mixed outcome
current accounts 84% 12% 4%
mortgages 30% 62% 8%
credit cards 79% 14% 7%
unsecured loans 37% 56% 7%
savings and deposit accounts 28% 60% 12%
other banking services 32% 52% 16%
investment complaints we agreed with the consumer's complaint we agreed with the business's response mixed outcome
mortgage endowments 32% 68% 0%
whole-of-life policies and savings endowments 32% 60% 8%
personal pensions 16% 82% 2%
investment bonds 32% 62% 6%
stockbroking and portfolio & fund management 35% 59% 6%
insurance complaints we agreed with the consumer's complaint we agreed with the business's response mixed outcome
payment protection insurance (PPI) 45% 53% 2%
motor insurance 47% 49% 4%
buildings insurance 35% 59% 6%
contents insurance 33% 63% 4%
travel insurance 35% 62% 3%
health insurance 32% 67% 1%

These figures exclude complaints that were outside our remit - or withdrawn - where we made no decision on the merits of the case.

Where we uphold a complaint in favour of a consumer - either wholly or partly - there are a number of ways in which we can put matters right, depending on the individual circumstances of the case. These include:

  • Telling the business to pay redress - to put the consumer in the position they would now be in, if the business hadn't got it wrong in the first place.
  • Telling the business to compensate the consumer for particular distress and inconvenience - generally an amount between £150 and £500, where we believe the individual circumstances justify it.
  • Directing the business to take action, to put right what's gone wrong. This can range from correcting credit references to paying a previously rejected insurance claim.
  • Telling the business to apologise to the customer.

Where we do not uphold a complaint in favour of a consumer, we aim to explain clearly why we believe the business handled the complaint fairly. In some cases, the business could have prevented the complaint from arising in the first place if it had explained things better. In other cases, our explanation simply reinforces - from an entirely impartial point of view - what the business has already explained to the consumer.

We recognise that any decision of ours will be disappointing for the side that doesn't hear from us what it wanted to hear. But whatever the outcome of an individual dispute, we hope we will have "added value" by giving our view on the case fairly, authoritatively and impartially.


time taken to resolve cases

year ended 31 March resolved within 3 months resolved within 6 months resolved within 9 months resolved within 12 months
2008 42% 70% 81% 86%
(excluding mortgage endowment complaints)
53% 83% 94% 96%
2007 34% 61% 76% 85%
(excluding mortgage endowment complaints)
51% 81% 89% 92%
2006 32% 59% 75% 85%
(excluding mortgage endowment complaints)
43% 74% 84% 89%

The chart above shows the time it takes to settle disputes that are referred to the ombudsman service. For complaints about banking, insurance and investments other than mortgage endowments, we resolved 53% of all disputes within three months - fractionally exceeding the timeliness target of 50% set in the budget for 2007/08.

We also exceeded the timeliness targets - set in the budget for 2007/08 - for resolving all complaints other than mortgage endowments within six months, nine months and a year. Our timeliness statistics during the year showed an improvement on the previous year's figures.

Our ability to handle mortgage endowment complaints as quickly as we would have liked has been affected during the year by the increased proportion of hard-fought cases that have had to be referred to an ombudsman for an official final decision - rather than being settled by an adjudicator at an earlier and more informal stage of our dispute-resolution process.

This means that, on average, mortgage endowment complaints took between nine months and a year to settle. This is in line with the timeliness targets set in the budget for 2007/08.

The concern for consumers with mortgage endowment complaints is whether they will be able to pay off their mortgage when their endowment matures - usually at some future date. Generally, no loss has yet materialised in real terms - so a longer waiting period before deciding these cases, whilst regrettable, is less critical than in other types of cases where loss may have already materialised.

We continue to give priority to cases where the consumer might clearly be disadvantaged by having to wait longer, for example through financial hardship or for medical reasons.

Disputes that cannot be resolved following the intervention of an adjudicator - and that therefore need to involve an ombudsman directly - tend to be more entrenched and legalistic. This affects not only the time it takes us to resolve these cases but also our unit cost and productivity.

During the year we also continued to handle a significant proportion of mortgage endowment complaints involving smaller businesses. In these cases, we are no longer able to benefit from the efficiencies and economies of scale that we developed when dealing with significant volumes of cases involving the largest financial services groups.

quality and consistency

We are committed to monitoring the quality and consistency of our work. Our quality management process includes systems that alert managers to any cases where the standards we set may not have been achieved - so that appropriate action can be taken to put things right. We also have a quality-audit mechanism that measures quality levels across our teams of adjudicators, as well as providing a means of testing the integrity of our quality processes generally.

The quality-audit mechanism also involves members of the executive team, including the chief ombudsman, monitoring the standard of adjudicators' work by reviewing and assessing randomly-selected closed cases. We have further strengthened our commitment to quality by setting up a quality committee as a sub-committee of the board - with a formal remit to oversee our quality processes and results.

Work in this area is coordinated by our quality team which reports directly to the chief ombudsman. As well as spearheading our quality-improvement activities across all areas of the organisation, the quality team provides expertise and support for our process-improvement and project-management work.

It is also responsible for producing and verifying management information and performance data for operational and strategic purposes.

Our commitment to continuous improvement is underpinned by our programme of stakeholder research - which helps give us a closer understanding of what our customers want, how they rate the service we provide, and where we could do things better. This includes:

  • Running quarterly surveys to monitor the views of the businesses we cover.
  • Carrying out customer-satisfaction research on an ongoing basis, to record and measure the opinions of consumers whose complaints we have handled.
  • Monitoring general consumer-awareness of the ombudsman service, on a quarterly basis, to help with our work on accessibility - ensuring that everyone who needs to contact us knows how to find us and how to access our services.
  • Running our "voice of the customer" system, so that we can take account of customer comments, whoever they are from, whenever they arise, and whatever they are about.

Our knowledge-management systems are at the heart of our work to ensure the accuracy and consistency of our approach to handling individual cases. Over 85% of the financial products and services about which we commonly receive complaints are now covered by "KIT", our in-house knowledge-management toolkit. This intranet-based resource is supplemented with a wide range of in-house clinics, briefings and seminars - which help us share knowledge, learn and improve.

As an organisation that every day deals with thousands of pieces of correspondence and makes hundreds of decisions on complaints, we recognise that things can and do go wrong. A key consideration in looking at complaints is the way in which the businesses concerned have tried to put things right. In just the same way, we believe an important test by which we should be judged is the way in which we recognise and deal with any shortcomings - and learn the lessons from them.

This is why - just like the businesses whose complaints we handle - we have our own formal complaints procedure for people who are unhappy with the level of service we have provided. These complaints are handled by a specialist group of complaints handlers, reporting directly to our corporate director. Where we cannot resolve a complaint about our service, it can be referred to the independent assessor.

our budget and productivity

The Financial Ombudsman Service is funded by an annual levy paid by the businesses we cover - and by case fees that we charge each business for settling disputes referred to us about them.

In the 2007/08 financial year we did not, however, charge businesses case fees for the first two disputes we settled during the year. As from April 2008, we increased the number of free cases - following consultation with the financial services industry - so that businesses are charged case fees only for the fourth (and any subsequent) dispute during the year.

Our budget is calculated on the basis of workload forecasts that we consult on publicly each year in January and February - before the start of the new financial year.

Following consultation in January and February 2007, the boards of the FSA and the Financial Ombudsman Service agreed a budget for the ombudsman service - for the 2007/08 financial year - that assumed income of £57.3 million, expenditure of £57.3 million and a unit cost of £535.

The final figures for the year showed that our income from case fees was £2 million below budget. This largely reflected the fact that fewer mortgage endowment complaints were completed by our adjudicators - triggering a case fee - as an increasing proportion of these cases had to be referred to our ombudsmen for a final decision, which is a longer and more complex process.

our income and expenditure

our income and expenditure (summary) actual
year ended 31 March 2008
year ended 31 March 2008
year ended 31 March 2007
year ended 31 March 2006
annual levy 19.5 19.4 16.6 11.7
case fees 35.5 37.5 36.1 39.8
other income 0.5 0.4 0.4 0.5
total income 55.5 57.3 53.1 52.0
staff-related costs 41.4 43.6 42.5 40.5
other costs 9.6 10.2 9.7 8.9
financing charges 0.2 0.3 0.3 0.3
depreciation 1.7 3.2 2.5 2.9
total expenditure 52.9 57.3 55.0 52.6
exceptional costs 3.1 0.0 0.0 0.0
surplus/(deficit) (0.5) (0.0) (1.7) (0.6)

The figures for the year ended 31 March 2008 are drawn from our unaudited management accounts. The directors' report and audited financial statements for 2007/08 [PDF version opens in new window] are available separately.

Our total expenditure for the year of £52.9 million was £4.4 million below budget - mainly due to staff-related costs being lower than planned. Exceptional costs of £3.1 million related to restructuring and redundancy costs, following the sharp decline in the number of new mortgage endowment cases. These costs had originally been estimated at £4 million. There is more information about these costs in our corporate plan & budget published in January 2008.

The amount of bad debts during the year was £0.4 million - resulting from firms we cover going out of business, leaving case fees unpaid with no realistic chance of recovery. Over 85% of these costs related to firms that have either been liquidated or placed "in default" by the Financial Services Compensation Scheme (FSCS).

average number of cases resolved weekly by each adjudicator

year ended
31 March
average number resolved
2008 4.0
2007 4.1
2006 4.5
2005 4.4
2004 4.9
2003 4.9
2002 3.7

our unit cost

year ended
31 March
our unit cost* (£)
2008 529
2007 484
2006 433
2005 496
2004 473
2003 518
2002 684

* our unit cost is calculated by dividing our total costs (before financing charges and any bad debt charge) by the number of cases we complete

Our unit cost for the year was £529 - compared with an estimated figure in the budget of £535, and a figure of £484 in the previous year. This 9% increase in our unit cost is linked to the lower levels of productivity we had been anticipating - once we lost the significant economies of scale that we achieved in earlier years with the very large volumes of mortgage endowment cases.

Changes in the mix of cases we deal with - both in terms of the topics the complaints involve and the complexity of the individual cases - means that there are fluctuations in the number of disputes each adjudicator handles.

image of annual review 2008

This annual review is published in accordance with paragraph 7 of schedule 17 of the Financial Services and Markets Act 2000.