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annual review 2012/2013

1 April 2012 to 31 March 2013

what the complaints were about

new cases by area of complaint

type of complaint 2013 2012 2011 2010 2009
banking and credit 15% (77,176 cases) 24% (64,234 cases) 31.5% (65,063 cases) 44% (71,700 cases) 43% (55,038 cases)
investments and pensions 4% (19,834 cases) 6% (14,862 cases) 7.5% (15,483 cases) 14% (22,278 cases) 17.5% (22,265 cases)
insurance excluding PPI 7% (33,172 cases) 10% (27,563 cases) 10% (20,978 cases) 12% (19,838 cases) 15% (19,102 cases)
payment protection insurance (PPI) 74% (378,699 cases) 60% (157,716 cases) 51% (104,597 cases) 30% (49,196 cases) 24.5% (31,066 cases)
new cases in total 508,881 264,375 206,121 163,012 127,471

year ended 31 March

new cases by financial product

payment protection insurance (PPI) 74
complaints about all other financial products 26

new cases involving financial products other than PPI

credit cards 15
current accounts 15
mortgages 9
consumer-credit products and services
(eg hire purchase, debt collecting and catalogue shopping)
motor insurance 6
unsecured loans 6
savings accounts 4
buildings insurance 3.5
mortgage endowments 3.5
pensions 3.5
"with-profits" and unit-linked bonds 3.5
term assurance 3
whole-of-life policies and savings endowments 2.5
travel insurance 2
contents insurance 1.5
other products 15.5

what issues the cases involved

payment protection insurance (PPI): 74%

of which

  • complaints about sales and advice: 99%
  • other complaints: 1%

insurance (excluding PPI): 7%

of which

  • complaints about claims: 55%
  • complaints about sales and advice: 25%
  • complaints about administration: 20%

banking and credit: 15%

of which

  • complaints about charges: 34%
  • complaints about administration: 33%
  • complaints about sales and advice: 11%
  • complaints about transactions: 7%
  • other complaints: 15%

investments and pensions: 4%

of which

  • complaints about sales and advice: 62%
  • complaints about administration: 30%
  • other complaints: 8%

new cases by financial product

new cases by financial product year ended
31 March 2013
year ended
31 March 2012
annual change
payment protection insurance (PPI) 378,699 157,716 up 140%
credit cards 19,634 19,183 up 2%
current accounts
including complaints about:
19,560 14,595 up 34%
- "packaged" accounts 1,629 (not recorded separately)  
- direct debits and standing orders 651 538 up 21%
- business bank-charges 495 414 up 20%
mortgages 11,920 9,537 up 25%
consumer-credit products and services
including complaints about:
8,470 7,416 up 14%
- point-of-sale loans 1,939 2,247 down 14%
- hire purchase 1,621 1,545 up 5%
- catalogue shopping 950 695 up 37%
- debt collecting 817 576 up 42%
- credit broking 711 627 up 13%
- store cards 650 476 up 37%
- pay-day loans 542 296 up 83%
- debt adjusting 484 462 up 5%
- hiring, leasing and renting 304 240 up 27%
- debt counselling 126 124 up 2%
- credit reference agency 109 69 up 58%
- home credit 98 41 up 139%
unsecured loans 7,809 6,262 up 25%
motor insurance 7,785 7,264 up 7%
other types of general insurance
including complaints about:
6,330 5,488 up 15%
- commercial vehicles and property 1,319 1,065 up 24%
- home-emergency cover 1,284 1,473 down 13%
- pet insurance 830 554 up 50%
- mobile phone insurance 615 599 up 3%
- roadside assistance 490 364 up 35%
- guaranteed asset protection ("gap") insurance 309 213 up 45%
- business protection 261 160 up 63%
- building warranty 206 129 up 60%
- caravan insurance 79 89 down 11%
savings accounts 4,967 4,286 up 16%
investment-linked products
including complaints about:
4,697 3,308 up 42%
- investment ISAs 1,528 904 up 69%
- unit-linked bonds 1,030 856 up 20%
- "with-profits" bonds 675 542 up 25%
- guaranteed-income bonds 580 352 up 65%
- unit trusts 165 138 up 20%
- PEPs 132 51 up 159%
- "structured" products 108 139 down 22%
mortgage endowments 4,657 3,267 up 43%
buildings insurance 4,611 4,556 up 1%
including complaints about:
4,401 3,454 up 27%
- personal pension plans 2,207 1,827 up 21%
- small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 697 562 up 24%
- annuities 624 511 up 22%
- SERPs 476 294 up 62%
- income draw-down 189 94 up 101%
- pension mortgages 100 83 up 20%
- free-standing additional voluntary contribution (FSAVC) schemes 95 76 up 25%
other banking services
including complaints about:
3,838 2,955 up 30%
- cash machines 1,285 836 up 54%
- money transfer 1,036 688 up 51%
- cheque clearing 686 670 up 2%
- electronic payment 400 403 down 1%
- safe custody 120 70 up 71%
- foreign currency 113 74 up 53%
term assurance 3,572 1,432 up 149%
whole-of-life policies and savings endowments 3,241 2,754 up 18%
travel insurance 2,742 2,431 up 13%
contents insurance 2,027 2,089 down 3%
income protection 1,481 965 up 53%
portfolio management 1,449 1,152 up 26%
critical illness insurance 1,370 817 up 68%
stockbroking 979 690 up 42%
private medical insurance 949 513 up 85%
secured loans 925 (not recorded separately)  
legal expenses insurance 907 805 up 13%
extended warranty insurance 903 881 up 2%
personal accident insurance 495 322 up 54%
including complaints about:
463 237 up 95%
- interest-rate hedging products 258 (not recorded separately) down 10%
- spread-betting



down 10%

total number of new cases 508,881 264,375 up 92%

what the complaints were about: insurance

Complaints about insurance - including payment protection insurance (PPI) - accounted for 81% of the total number of new cases we received during the year (70% in the previous year).

The number of new cases relating to insurance, including PPI, increased by 122% - up from 185,279 in 2011/2012 to 411,871.

The tables below show how these complaints were spread across the different types of insurance.

type of complaint %
payment protection insurance (PPI) 92
all other insurance-related complaints 8
type of complaint %
motor insurance 23.5
buildings insurance 14
term assurance 11
travel insurance 8
contents insurance 6
income protection 4.5
commercial vehicle and property insurance 4
critical illness insurance 4
home-emergency cover 4
legal expenses insurance 3
private medical insurance 3
extended warranty insurance 2.5
pet insurance 2.5
mobile phone insurance 2
roadside assistance 1.5
personal accident insurance 1.5
guaranteed asset protection ("gap" insurance) 1
other (including business protection, building warranty and caravan insurance) 4

The increase in insurance cases largely resulted from the 140% rise in the number of complaints about payment protection insurance (PPI) - from 157,716 cases in 2011/2012 to 378,699 in 2012/2013.

However, the number of complaints about insurance other than PPI also rose significantly - by 20% - to 33,172 cases. This is the highest number of insurance complaints we have received in any year since we were set up in 2000.

The rise in the number of insurance complaints (other than PPI) included increases of:

  • 7% in motor insurance complaints.
  • 24% in disputes involving commercial vehicles and property.
  • 50% in pet insurance complaints.
  • 60% in building warranty cases.
  • 85% in private medical insurance disputes.

On the other hand, the number of complaints fell by:

  • 3% in contents insurance.
  • 11% in caravan insurance.
  • 13% in home-emergency cover.

payment protection insurance (PPI)

year ended 31 March number of complaints
2013 378,699
2012 157,716
2011 104,597
2010 49,196
2009 31,066
2008 10,652

annual change: +140%

In last year's annual review we reported a 51% increase in the volume of complaints referred to us about payment protection insurance (PPI) during 2011/2012 - after our PPI workload had already doubled in the previous year.

Following public consultation at the start of 2012, we scaled up our operations significantly - increasing our casehandling capacity to take on an expected 165,000 new PPI cases during the 2012/2013 financial year. This included recruiting around 1,000 new employees to help deal with these unprecedented volumes.

However, the number of PPI cases we actually received during the year significantly exceeded these planning assumptions. During the year consumers referred PPI complaints to us at a rate of up to 2,000 new cases a day. This meant that by the end of the year we had received a record 378,699 PPI cases - more than double the estimated number we had planned for and the largest number of complaints we have ever received in a year about a single financial product.

In last year's annual review we reported that we had received our 300,000th PPI complaint in December 2011. Just one year later - in December 2012 - we received our 600,000th complaint. By the end of March 2013, PPI complaints accounted for 38% of our total workload since the ombudsman was set up in 2000.

Towards the end of the year, some financial businesses began to report that the levels of PPI complaints they were receiving finally seemed to be steadying - and in certain areas, slowing down. This should be reflected over time in reducing numbers of disputes referred to the ombudsman service - something that has been factored into our operational plans for the financial year 2013/2014.

However, given the substantial volumes of cases we have already received, the challenge of resolving all the issues in our PPI caseload seems likely to remain with us for some time - indeed, probably for several years.

This means that many consumers and businesses are having to wait much longer for us to be able to assess their case. This is partly because the additional casehandlers we took on during the year to resolve PPI cases have had to focus on processing the unprecedented volumes of new cases arriving with us - rather than on assessing the merits of existing cases.

But there are other reasons why we are not always able to resolve cases as quickly and efficiently as we would like. And we try to be as open as we can with people about the delays - and the reasons for them. This includes:

  • Running a section on our website called your PPI case with us: what's happening? - with updated FAQs and videos.
  • Sending a regular e-newsletter to people who have signed up for updates on PPI-related developments in general.
  • Asking consumers to give us instant feedback - at the end of phone calls
    - on how they feel about our handling of their case while they wait for it to be assessed.

Around 70% of our PPI workload during the year related to complaints about the four largest banking groups. The way these businesses handled their customer complaints - and fluctuations in the proportions of cases they upheld or rejected - had a significant impact on the number and type of disputes that were subsequently referred to us to resolve.

During the year the proportion of PPI cases we upheld in favour of the consumer varied substantially from business to business - from 6% to 90%. This suggests that some financial businesses are still not following the well-established approach to resolving PPI complaints that banks challenged - unsuccessfully - in their judicial review back in 2011.

We also continued to see a number of claims-management companies behaving unhelpfully. This included some claims managers taking a lax approach to understanding the true nature of their clients' circumstances.

Complaints poorly handled by financial businesses - and cases poorly argued and misrepresented by claims managers - can all lead to disputes being referred to the ombudsman service unnecessarily.

This is why we continued to spend substantial time and effort during the year explaining our PPI approach to financial businesses and claims managers. Where we have seen a business or claims manager appearing to act unreasonably, we have referred these matters to the relevant regulator.

During the year we reported in ombudsman news (issue 108) our experience of dealing with a small number of cases involving alternative "protection products" designed to do many of the same things as PPI.

While not widespread, the complaints we have seen about these alternative products have involved similar issues to PPI - for example, disputes over whether a business provided advice about the product with reasonable care and skill, or whether it gave the consumer information in a way that was clear and not misleading.

motor insurance complaints

year ended 31 March number of complaints
2013 7,785
2012 7,264
2011 5,784
2010 5,451
2009 6,267
2008 6,009

annual change: +7%

The number of complaints involving motor insurance continued to rise during the year - by 7% - following a 26% increase in the previous year. The proportion of motor insurance complaints we upheld in favour of the consumer - at 47% - also remained higher than in other areas.

These trends continue to reflect the tougher economic times. But as we noted in last year's annual review, they also reflect the increased number of entrenched disputes where neither side is prepared to reconsider their position or agree to informal mediation.

Disappointingly, disputes over "non-disclosure" by the consumer rose by some 60% during the year. Many of these "non-disclosure" complaints could have been avoided if the insurer had asked the consumer clearer questions when they first applied for the policy. For example, we also continued to see problems where insurers asked only general questions about convictions, when they actually wanted to know specifically about any fixed penalty points.

Our approach to complaints involving "non-disclosure" and misrepresentation has developed over many years - and is reflected in law in the new Consumer Insurance (Disclosure and Representation) Act 2012, which came into force on 6 April 2013.

A number of "non-disclosure" complaints involved consumers who had used comparison websites that had confused them. This happened, for example, where the comparison sites had made certain assumptions about the consumer and had automatically filled in some of the information.

We have talked about this with the Association of British Insurers (ABI) - as part of out work to feed our experience back to the insurance sector - and suggested where insurers might want to remove some of the ambiguity that can arise when consumers use these websites.

During the year we continued to see cases where an insurer suspected that a claim was fraudulent - and made assumptions without asking the consumer for an explanation of what had happened. If the insurer had asked more questions in the first place - to help it decide whether any "non-disclosure" was innocent, inadvertent or deliberate - the dispute may never have arisen.

There are often similar issues in disputes involving claims for stolen vehicles. 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. In these cases, we check that a proper investigation has been carried out. This includes the insurer having the vehicle thoroughly examined and giving the consumer the opportunity to explain any apparent inconsistencies.

We continued to see complaints involving guaranteed asset protection - so-called "gap" insurance - with the number of these cases rising by 45% to 309.

This type of insurance 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. We covered the issues we see in these complaints in detail in last year's annual review.

complaints about buildings and contents insurance

year ended 31 March buildings insurance complaints
2013 4,611
2012 4,556
2011 3,469
2010 3,437
2009 3,447
2008 2,669

annual change: +1%

year ended 31 March contents insurance complaints
2013 2,027
2012 2,089
2011 1,697
2010 1,863
2009 1,671
2008 1,363

annual change: -3%

The quality of the investigation carried out by the insurer was a major issue in many of the disputes referred to us during the year involving buildings and contents insurance.

We continued to see cases where claims for damage had been rejected on the basis of the loss adjuster's "gut instinct" rather than on specific evidence. Where this happened, we had to request further information from the insurer concerned. In the meantime, the consumer's property may have been damaged further - especially during periods of severe weather.

Increasingly, insurers appoint others to look into and settle claims on their behalf. Where an insurer has appointed someone else to act on its behalf, the insurer is responsible for the action - or inaction - of its agent. We continued to see a significant number of disputes this year where consumers had been left in difficult situations, perhaps with unsatisfactory repairs, because their insurer refused to accept liability for its agent.

In these cases, as well as telling the insurer to put things right (sometimes by appointing a different contractor) we also require it to compensate the consumer for the distress and inconvenience they have suffered. While some insurers offer compensation when they or their agents get it wrong, others do not - or make only a token gesture when significant compensation would have been appropriate.

During the year we continued to see disputes where the insurer had looked at a claim under just one section of their customer's policy. For example, the insurer might have rejected a claim for storm damage - where it could also have considered the claim under the accidental damage section of the policy.

We also saw examples of insurers failing to explain the various policy terms they had relied on to reject a claim. In some cases, insurers told the consumer all the terms they had relied on only after we had got involved - and after we had said they could not rely on the single term they had cited originally.

From the cases we see, some insurers seem reluctant to give more than one reason for turning down a claim. But consumers may be less inclined to complain if they are fully informed - and it can avoid confusion and disappointment further down the line. We believe that consumers should already know where they stand with their insurer when they bring their case to us.

We also continued to see complaints that an insurer had failed to make it clear that the sum insured should reflect the full value of the consumer's contents or home - and instead had 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.

There have been several cases this year where confusion has arisen over the difference between:

  • "money awards" - where we can tell a business to pay compensation of up to £150,000 (£100,000 for complaints we received before 1 January 2012); and
  • "directions" - where we can tell a business to reinstate a policy and deal with a claim in line with the other terms and conditions of the policy.

Where we tell an insurer to reinstate a policy that has been cancelled ("avoided"), the limit for "money awards" does not apply. This is because when we make our decision, we do not know what the claim is actually "worth". And there could be other reasons why the claim should not be paid. We are simply telling the insurer that it should not have cancelled the policy - and must consider the claim.

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 - although each case always turns on its own individual facts.

Given the availability of this information on our website - and through our technical advice desk - 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
2013 2,742
2012 2,431
2011 2,536
2010 2,003
2009 1,973
2008 1,628

annual change: +13%

During the year the number of travel insurance disputes referred to us rose by 13%, following a slight fall in the previous year.

A significant proportion of these cases involved problems caused by consumers buying travel insurance over the internet. Many of these problems resulted from details of the cover and medical warranty not being made clear to the consumer before they bought the policy.

In other cases, travel insurers had not asked for information at the point of sale - which meant that some consumers had found themselves without cover for pre-existing conditions they had not declared. In these cases, we look carefully at the online sales process to decide whether important information about the cover was brought to the consumer's attention before they took out the policy.

We also saw problems arising where consumers had taken out travel insurance policies over the phone. When we listened to recordings of phone calls to medical helplines, we found it was not always made clear to the consumer what they needed to disclose. In some cases, we heard consumers being asked questions about their own health - but not about the health of fellow travellers whose medical conditions could also affect the insurance cover.

This was a significant issue in the disputes we continued to see where consumers had claimed for trips they had cancelled because someone else had fallen ill. In some of these cases, we had to explain to the consumer that the insurer had turned down their claim because it related to an existing illness.

In some cases, however, the consumer had not known about the illness when they had taken out the policy. In situations like this, we look carefully at the evidence to make sure the insurer has taken into account only what the consumer actually knew at the time.

During the year we ran seminars in London and Manchester to share feedback with the travel insurance sector - and to discuss our approach to a range of issues that arise in travel insurance complaints. We believe that by talking about what we see, we can help insurers resolve more complaints directly with consumers - without the need for our involvement.

health and medical insurance complaints

year ended 31 March number of complaints
2013 3,800
2012 2,295
2011 1,754
2010 2,026
2009 1,874
2008 1,839

annual change: +66%

The number of disputes referred to us involving critical illness cover, income protection and private medical insurance all increased substantially during the year - from 817 to 1,370, from 965 to 1,481, and from 513 to 949 cases respectively.

Many of the complaints we saw about critical illness cover and income protection began with the consumer telling us that they had been mis-sold payment protection insurance (PPI). But when we investigated, we found that it was not PPI that the consumer had been sold but one of these other insurance products.

Given the significant number of consumers who have health and medical insurance policies in place, we see a relatively small number of complaints about them. But the disputes that are referred to us are some of the most difficult cases that our specialist adjudicators and ombudsmen deal with. Many of the people who come to us are ill, distressed and are often experiencing financial difficulty.

To decide the outcome in these cases we make a careful assessment of the medical evidence available to us. The quality of that evidence is very important, and we usually prefer to base our decisions on the evidence of a medical specialist who has actually met and treated the consumer.

Despite the disappointing rise in the number of health and medical insurance complaints, this is an area where we continue to have constructive dialogue with the insurers involved. Our work to share feedback with this sector has included a recent conference we ran in Edinburgh on assessing claims and resolving disputes earlier, based on our established approach.

what the complaints were about: banking and credit

Complaints about banking and credit made up 15% of the total number of new cases we received during the year (24% in the previous year). The number of new cases relating to banking and credit rose by 20% - from 64,234 in the financial year 2011/2012 to 77,176 in 2012/2013.

This is the highest number of banking and credit complaints we have received in any year since we were set up in 2000.

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

type of complaint %
credit cards 25.5
current accounts 25.5
mortgages 15.5
consumer-credit products and services (eg point-of-sale loans, hire purchase and catalogue shopping) 11
unsecured loans 10
savings accounts 6.5
secured loans 1
other banking services 5

credit card complaints

year ended 31 March number of complaints
2013 19,634
2012 19,183
2011 17,466
2010 18,396
2009 18,590
2008 14,123

annual change: +2%

We continue to see a significant number of complaints involving section 75 of the Consumer Credit Act 1974. Under section 75 a credit-card provider can be jointly liable with the supplier of the goods or services, where a consumer has a valid claim for misrepresentation or breach of contract.

During the year we saw complaints involving all kinds of purchases - including energy-saving products like solar panels and alternative heat-source appliances.

In some of these cases, the credit-card providers had not looked carefully enough into the consumers' complaint about breach of contract or misrepresentation by the provider of the goods or services. In other cases, the credit card provider had been too quick to accept the word of the provider of the goods or services about whether there had been any breach of the contract.

Disputes we settled involving section 75 included complaints from consumers who had used their credit cards to pay for PIP cosmetic implants - a type of implant that the Department of Health has said was "clearly substandard". In some of these cases, the issue was complicated by the fact that the person who paid for the implants was not the same person who had the procedure.

This is significant, because for section 75 to apply, there must be a three-part "chain" that links the provider of the goods or services, the consumer and the provider of credit. In each case we looked carefully at the contract to see whether section 75 applied.

The growing use of e-commerce has introduced new challenges in dealing with credit card complaints. If there is no paper contract and signature, it is more difficult for us to establish exactly what was said and agreed in the contract between the consumer and the provider of the goods or services.

We found again this year that some of the legal representations made to us by credit card providers about section 75 were poorly thought through. Some providers tried to narrow artificially the way that section 75 applies. By contrast, consumers and their representatives sometimes wanted to "stretch" the way that section 75 works, to cover transactions that seemed to us to be outside the scope of the section.

The law is one of the things we must take account of when we decide the outcome of cases - so it is not our job either to limit or to develop the provisions of section 75.

We saw fewer complaints during the year about "default charges" on credit cards. These are the charges that consumers incur if they go over their credit limit, miss a payment or are late making a payment.

In part, the number of complaints about default charges may have declined because some credit card providers have been able to show that they have calculated and applied the charges fairly in the cases we have seen.

This has meant that claims-management companies (which brought most of these types of complaints on behalf of consumers) have no longer pursued cases for their clients against those credit card providers.

Significant numbers of complaints continued to involve disputed credit card transactions. The law gives special protection to consumers when unauthorised transactions are made on their credit card accounts. But many credit card providers have still not fully understood that they are required by law to apply rules to disputed credit card transactions that differ from the rules they should apply to disputed transactions made with other types of plastic card.

During the year we saw an increasing number of consumers coming to us well prepared with information they have researched on the internet. Much of this information can be useful - but some of it is not always accurate.

Our first step in many of the complaints we see involving disputed transactions is to explain clearly to both parties the rules that actually apply. This approach has meant that we have been able to resolve many of these disputes more informally at an early stage.

current account complaints

year ended 31 March number of complaints
2013 19,560
2012 14,595
2011 19,944
2010 25,252
2009 13,682
2008 39,263

annual change: +34%

The number of complaints referred to us by consumers about current accounts increased substantially during the year - by 34% - after two years of declining numbers.

The cases we saw included a significant number of complaints from consumers who told us that they were in financial difficulty - and felt they had not received fair treatment from their current account provider. Consumers in these cases complained about:

  • overdraft facilities being removed unexpectedly;
  • difficulties in cancelling payments that they would not have enough money to cover; and
  • current account providers not being flexible in agreeing overdraft repayment arrangements.

In these types of cases our aim is generally to make existing problems more manageable and to help break the cycle of account charges - so that the consumer is less likely to slip back into problems with their account in future.

Where we see that a consumer is in financial difficulty, we generally aim for an outcome involving a "package" of fair measures that we usually expect the current account provider to offer in these circumstances. What this package of measures may involve depends entirely on the individual circumstances of the case. This means these cases can often take some time for us to assess and resolve.

In these cases we also rely on the consumer communicating with us openly and honestly about their wider financial position. And we expect the current account provider to work constructively with us in responding to our ideas and suggestions.

During the year we received 1,629 complaints about so-called "packaged" accounts - where the consumer pays a monthly fee for a current account that includes a bundle of products and services.

This was a very substantial increase on the number of these cases we had received in previous years - which is why we have shown this figure separately for the first time in this annual review.

In the past, consumers bringing complaints about packaged accounts usually said either that they were given the account without being offered the option of a free current account, or that their existing free account had been "upgraded" without their consent to an account they had to pay for.

This year, however, a large proportion of the consumers who complained about packaged accounts told us they were unhappy because they believed that the insurance products contained within the package had been mis-sold to them. This was often because they had realised that some or all of the insurance products were unlikely to be suitable for their needs.

Complaints about disputed transactions involving current accounts continued to form a significant part of our work during the year. The transactions in question were usually made using a plastic card at a cash machine, or using a point-of-sale card machine.

In other cases, the transactions were made using online or phone banking. In a few of the cases we saw, fraudsters had exploited certain current account features to get one-off cash payments agreed by the current account provider.

Our work on settling complaints about disputed transactions involving current accounts has often been slower than we would have wanted. Evidence supplied by current account providers has often failed to cover everything we asked for - which meant we have frequently had to go back to them with more questions.

We have also found that some of the evidence supplied by current account providers was not of a high enough standard to help us deal with a case effectively - because their staff handling complaints were confused or mistaken about the rules covering consumers' liability for disputed transactions.

We have seen a growing number of cases where fraudsters have deceived consumers with "phishing" phone calls or emails. "Phishing" happens where a fraudster poses as the consumer's bank to get them to disclose personal information - or even hand over cards. The fraudster then uses the information or the cards to access the money in the consumer's bank account.

Fraudsters have been using increasingly sophisticated methods to target consumers in this way. We have to decide in each individual case whether a consumer's response to a fraudster made them responsible for the loss.

Some consumers who referred complaints to us during the year about disputed transactions told us they had been the victims of cheque-related fraud. This might have happened where, for example, someone persuaded the consumer to "cash" a cheque, which later turned out to have been stolen.

However, increasing numbers of consumers told us that a fraudster had paid a stolen cheque into their account - and then drew on the proceeds - without their knowledge.

In these cases, when the cheque was later identified as stolen, the consumer's account was debited with the value of the cheque - and they were left out of pocket by whatever amount had already been drawn on the cheque. Getting to the bottom of what happened in these cases usually takes a lot of investigation.

We have also continued to see complaints this year about "continuous payment authorities" - where the consumer uses their debit card details to give a third party the authority to take money from their current account in the future. In the disputes referred to us about this, consumers have often set up continuous payment authorities with internet or mobile phone providers, or with short-term lenders such as payday loan companies.

These cases usually involved consumers trying to cancel the continuous payment authority with their current account provider - who wrongly told them that this was not possible. In some cases, the current account provider agreed to cancel the continuous payment authority but then did not do so - meaning that further payments continued to be taken from the consumer's current account.

Many of these problems seemed to have come about because consumers were unsure how they had actually paid for services. In some cases current account providers had not fully understood the rules covering continuous payment authorities - or had systems that did not make it easy for them to act on a consumer's request to cancel this type of arrangement.

complaints about mortgages

year ended 31 March number of complaints
2013 11,920
2012 9,537
2011 7,067
2010 7,469
2009 7,602
2008 6,824

annual change: +25%

During the year the number of mortgage-related complaints referred to us again increased substantially - by 25% - following an increase of 35% in the previous year.

The majority of these cases continued to relate to problems caused by administrative errors. Because of the way mortgage accounts work - and the fact that consumers often receive information about their mortgage only once a year in their annual statement - we have seen many cases where it took some time for a mistake to come to light.

Where this had happened - leaving mistakes left unchecked for a longer period - it often had a greater impact, leading to problems that were more difficult to put right easily. For example, where a consumer's monthly repayment had been calculated incorrectly, they may have found themselves significantly behind their repayment schedule.

We have also again seen a significant number of complaints from consumers who were having difficulty repaying their mortgage and were not satisfied with the way their lender had treated them. These cases included situations where consumers had been managing to pay their mortgage - but feared they would not be able to continue to do so, because they were facing redundancy or a reduction in their income for other reasons.

The range of mortgage complaints involving financial difficulty was very broad - from disputes over account charges to cases where consumers were facing the repossession of their home.

In many of these cases, we found there had been little meaningful communication between the consumer and their lender. Often consumers told us they felt frustrated that their lender was not really listening to them - or was not making enough effort to explore what could be done to help them through their difficulties.

In many cases, the absence of clear communication from the lender led the consumer to us.

We were often able to help resolve these complaints informally - by bringing to light the full facts of the consumer's situation and suggesting a range of options that the lender might be able to offer to help. We resolved many mortgage-related complaints this way.

But it remains disappointing to see cases escalated to us where the complaint could have been prevented if the lender had engaged more constructively with their customer in the first place.

During the year a number of consumers came to us because they had seen reports in the media about the manipulation by some banks of the so-called LIBOR rate - used by the world's largest financial institutions - and they were concerned about the effect of this on their own mortgage.

In some cases the consumer's concern had been heightened by the fact that their lender had failed to address their concerns properly.

Another symptom of dwindling consumer confidence in financial businesses was shown by the significant number of complaints we received during the year from consumers who had a suspicion that their lender had done something wrong in running their mortgage - but who couldn't point to a specific mistake or problem.

In many of these cases, the consumer had approached their lender but had not received a satisfactory response to their worries. In other cases, the consumer had been given inaccurate or conflicting information about what had happened in relation to their mortgage.

It has been disappointing to see the number of cases where it was only through our own involvement that the consumer finally got a satisfactory explanation of how their mortgage actually worked. Many consumers simply needed someone to take the time to talk them through certain technical points - to make sure they were happy that everything was as it should have been.

From what we have seen, we could only conclude that the staff at many lenders were themselves unable to explain clearly how their mortgage products worked - or to answer more difficult questions from their customers.

During the year we continued to see complaints from consumers with interest-only mortgages. A consumer with an interest-only mortgage makes a monthly payment that is set at a level that simply keeps the mortgage debt from increasing - but the full amount of the loan remains outstanding at the end of the mortgage term and must be repaid at that point.

In many of the cases involving interest-only mortgages, consumers told us that the main problem they had come up against was that their financial circumstances had changed - and were different from what they had expected when they had first taken out the interest-only mortgage.

Some consumers had found it impossible to sell their home for enough money both to repay their mortgage and to have enough left to buy a cheaper house. Other consumers had seen savings and investments - that they had earmarked to repay their mortgage - fail to make enough money to pay it off in full.

In all these cases, we looked to see whether the lender had given enough consideration to what it might reasonably have done to help.

Because each consumer had different circumstances and financial means, the outcomes in these cases varied - and included, for example, consumers being transferred to "lifetime" or equity-release type products, and the lender and the consumer agreeing new tailored repayment arrangements or an extension to the period of time a consumer had to sell their house.

There continued to be some complaints about movements in interest rates, particularly in the standard variable interest rates that lenders offered. We also saw complaints about consumers having their account taken over by a new lender - following the sale of their original lender's mortgage business.

Because many of these consumers attached a lot of importance to their mortgage account - as their biggest single financial commitment - the change in mortgage lender left many of them feeling anxious and upset.

In some cases the original lender had not explained the situation to the consumer and the consumer found their account being administered by a lender they had never heard of. In many of these complaints, poor communication - by both the old and the new lender - caused problems that escalated and ended as a full-blown dispute.

During the year we saw fewer complaints about requests to transfer or "port" mortgage products. This may reflect the fact that many consumers had come to the end of their fixed arrangements and so were free to move to another lender without charge.

But where consumers complained to us that they had been unfairly prevented from "porting" their loan, we were often able to help both sides agree a satisfactory outcome - by getting more information from the consumer and identifying possible solutions to the lender.

complaints about consumer credit

year ended 31 March number of complaints
2013 8,470
2012 7,416
2011 7,250
2010 6,329
2009 3,014
2008 849

annual change: +14%

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.

During the year, the number of consumer credit complaints rose by 14% - perhaps unsurprisingly, given that many people have continued to find their finances stretched.

This included an increase from 576 to 817 in the number of disputes about debt collectors. These cases continued to involve consumers complaining about the number of times they had been approached by a debt collector - and the way the debt collector had treated them.

Other consumers complained about standards of administration - and in particular, about the debt collector's failure to take account of payments that had been made or repayment terms that had been agreed.

In some cases the debt collector had approached someone for payment who wasn't the person whose name was on the consumer credit agreement. We are able to look at a complaint from anyone who the debt collector has approached about paying a consumer credit-related debt. So some of the consumer credit complaints we dealt with this year came from third parties who had been in communication with the debt collector.

During the year we saw an 83% increase in the number of complaints about payday lenders - from 296 cases to 542.

Many of these complaints were largely to do with how the lender had made use of the "continuous payment authority" that the consumer had given it - which allowed the lender to collect payments directly from the consumer's bank account.

Typical problems involved payday lenders trying to take payments unexpectedly - or repeatedly attempting to take payments when the consumer had already explained that they did not have enough money to cover the debt. We also saw complaints about unaffordable lending and about the debt recovery methods used by payday lenders.

We received a number of payday loan complaints from consumers who said they had never taken out the loan in question - which they assumed had been taken out in their name by a fraudster.

In dealing with cases like this, we usually need to look at the consumer's bank account as well as at the disputed transaction with the payday lender - because the proceeds of these loans are normally paid into the consumer's own current account.

We continued to see complaints during the year about credit broking and debt-management services. Many of these cases involved unexpected charges, charges that had been collected "upfront" for services that had not actually been provided, or services that had been administered poorly. In many cases, consumers told us that the financial business had described the service they had agreed to buy - or the cost of it - in a misleading way.

The number of complaints about credit reference agencies increased from 69 to 109. The cases we saw usually involved incorrect "markers" on credit files, consumers having difficulty getting incorrect information removed, and consumers who had signed up for a free credit-report trial and who then had difficulty stopping automatic charges after the trial had ended.

During the year we received 1,939 complaints about loans known as "point-of-sale loans" - down 14% on the previous year.

These are loans where the provider of the goods or services arranges the loan to finance a specific purchase - and the loan is then paid direct to them by the lender. Because of the way these loans are arranged, a consumer who takes one out - and then has a problem with their purchase - may be able to claim against the lender under section 75 of the Consumer Credit Act 1974.

In the past, many complaints we saw about point-of-sale loans involved loans taken out to pay for training courses and holiday club memberships. We saw fewer of those types of complaints this year.

But we continued to see a significant number of complaints about loans taken out to buy new and used motor vehicles. In most of these complaints, the consumer felt that the vehicle had been defective in some way and had approached the lender for redress.

As we have highlighted in previous annual reviews, when we have looked into these complaints we have frequently found motor credit providers reluctant to accept any liability in these matters. And during the year some motor credit providers still tried to insist that the consumer had to sort things out themselves with the garage. In some cases, for example, the lender had initially refused to consider the consumer's complaint, saying that the consumer should make a claim under the car warranty rather than against them.

In those cases we reminded the providers about their responsibilities under the law - and explained that the existence of a warranty did not affect the consumer's statutory rights.

complaints about unsecured loans

year ended 31 March number of complaints
2013 7,809
2012 6,262
2011 5,820
2010 6,285
2009 4,242
2008 2,940

annual change: +25%

In our previous year's annual review, we highlighted the number of complaints we had received from consumers who were experiencing financial difficulty - and who did not feel their lenders had treated them fairly. We have continued to see a growing number of these complaints this year.

In many of these cases the difficulties seemed to stem from lenders relying on a standard process - with very limited options available - to help consumers who contacted them to discuss financial difficulty.

In cases we have seen like this in recent years, this has often led to entrenched disputes where neither side could move forward - until the consumer approached us and we looked at what might be a fair approach to take to the problem.

This has generally involved suggesting fairly simple measures that could have been offered to the consumer sooner. It has also usually meant involving the consumer more constructively in the process, so that the dispute could be resolved informally.

During the year we saw a number of complaints about particular loan facilities or features being withdrawn. This has usually involved low cost or flexible lines of credit that were very attractive to the consumer. The problem often involved the lender withdrawing the facility without providing an explanation that the consumer found convincing.

In these cases the consumer also usually believed that they were entitled to have the facilities unchanged for as long as they wanted them. But we have generally found that the loan agreements clearly stated that the facilities in question could be reduced or removed. In these cases we need to explain to the consumer that they were not entitled to have the same arrangements indefinitely.

We have continued to receive complaints from consumers who had stood as guarantors for loans that someone else had taken out - often a partner or family member. In these cases, consumers had often not fully appreciated the seriousness of the obligation they had taken on when they signed as a guarantor.

Investigating these complaints therefore involves checking the evidence carefully to see if the lender gave the consumer full and clear information about the responsibility they were taking on.

In some cases we found that the lender had not done enough to make the consumer fully aware of the implications of the transaction. In a small number of cases, we found that the lender had improperly encouraged or pressured the consumer to enter into the guarantee.

complaints about savings accounts

year ended 31 March number of complaints
2013 4,967
2012 4,286
2011 4,783
2010 5,033
2009 5,183
2008 2,675

annual change: +16%

Administrative errors continued to be the underlying cause of many of the complaints we dealt with during the year that involved savings accounts. These errors included problems when consumers tried to open accounts, and difficulties arranging withdrawals and transfers.

A number of complaints were about fixed-rate cash-ISAs ("individual savings accounts") that the provider could withdraw at any time - after which the consumer would not be allowed to make any further payments into them.

If the consumer had not managed to fund the ISA up to its limit by the time the product was withdrawn, they were not then able to make any more tax-free ISA savings in that year - because the ISA rules allow consumers to open just one cash-ISA account during a tax year.

In these cases we looked carefully at the information the consumer had been given before they had opened their cash-ISA. We found that the providers concerned had not always made it clear enough that - once the fixed rate was withdrawn - the account would be entirely closed to new deposits.

We concluded that this was a disadvantageous term that most consumers would not ordinarily expect to find in a cash-ISA account. So it seemed to us that this should have been made very clear to the consumer before they opened the ISA.

If the interest rate on a consumer's account is going to be changed "materially" - and to their disadvantage - their account provider must let the consumer know.

We saw some complaints this year from consumers who felt that a reduced interest rate did have a material effect on them - but who had not received personal notification about the change. In some cases the interest-rate reduction was a large one. In other cases it was small - but it had been applied to a substantial account balance.

Some savings account providers pointed out that industry guidance gave a limit that should be reached before a change could be considered "material".

They argued that they had followed their own industry guidance, even though the regulatory rules on assessing whether a change is "material" required them to take account of both the size of the account balance and the size of the rate change. We did not agree with their interpretation of the industry guidance - or with their view that industry guidance took precedence over regulatory rules.

complaints about other banking services

year ended 31 March number of complaints
2013 3,838
2012 2,955
2011 2,733
2010 2,987
2009 2,725
2008 2,643

annual change: +30%

Complaints about the "faster payments service" continued to feature in our work during the year. These payments are almost instant and there are limited things that can be done to put a mistake right. This led to a number of disputes being referred to us, where consumers had made a mistake with their account number or sort code details - and money had been sent to the wrong account.

When payments are made online, they are allocated to an account using only the sort code and the account number that the consumer provides. There is no check against an account name.

This means that if, for example, a consumer makes a mistake when typing in an account number - and there is, coincidentally, an account with that number at the same branch - then the money will go into the wrong person's account.

The UK Payments Council's guidance (originally issued by its predecessor, the Association of Payment Clearing Services) says that when consumers make a payment they should be shown a short, prominent warning that only the account number and sort code - and not the account name - will be used to process the payment, and that a mistake could lead to delay or loss. We regard that approach as good industry practice - and we take it into account when we decide the outcome of these cases.

We also look at how the consumer's bank responded when the consumer told them about the mistake. And we consider the evidence carefully to decide whether the bank made a proper effort to recover the money from the bank where it had been sent by mistake.

Where the payment has already gone into the wrong account before the consumer realises they have made a mistake, it may be difficult for the receiving bank simply to take it back without their own customer's specific authority.

Where this has happened, the hope is that someone whose account was credited with someone else's money would willingly agree to their bank taking it back - and returning it to the right person.

We have continued to see disputes during the year about powers of attorney. Typically the complaints involved problems that arose when someone who had been given power of attorney by the account holder tried to register it with the bank. Other consumers complained to us about problems they had faced when they later tried to access the account - or obtain information - under the power of attorney.

A power of attorney is an important legal document. There are different types - which may have very different legal effects. In the complaints we saw, many bank branch staff were nervous about dealing with someone who held power of attorney for their customer - and they could have benefited from more in-depth knowledge about powers of attorney.

In some cases we found that bank staff had assumed - wrongly - that granting or registering a power of attorney can be effective only if the "donor" (the consumer who has given someone else power of attorney for them) no longer has mental capacity to deal with their own affairs.

This led to some frustrating - and in some cases very distressing - situations for the consumer or their representative.

As in previous years, we continued to see a number of complaints involving stolen or counterfeit cheques. In some cases consumers were given these cheques in payment for goods they had sold through classified adverts.

In other cases consumers told us that the cheques had been deposited in their accounts - and the money later withdrawn - without their knowledge or consent. These cases are often complex - and we sometimes need to obtain information about the accounts of third parties that appear to be connected to the transaction. We have the power to do this - in confidence.

Consumers also referred complaints to us during the year about cheques that had been intercepted by fraudsters and paid into accounts with other banks. We are usually able to deal with complaints about this type of problem - even if the consumer was not a customer of the bank into which the fraudster had paid the cheque.

what the complaints were about: investments and pensions

Although complaints about investments and pensions accounted for only 4% of the total number of new cases we received during the year (6% in the previous year), they increased by a third - to 19,834 cases.

These included increases of:

  • 21% in personal pension plan disputes.
  • 26% in portfolio management complaints.
  • 43% in mortgage endowment cases.
  • 69% in investment ISA complaints.

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

type of complaint %
mortgage endowments 23.5
whole-of-life policies and savings endowments 16.5
personal pension plans 11
investment ISAs 7.5
portfolio management 7.5
unit-linked bonds 5
stockbroking 5
small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 3.5
"with-profits" bonds 3.5
annuities 3
guaranteed-income bonds 3
SERPs 2.5
(including interest-rate hedging products and spread-betting)
other (including unit trusts, "structured" investments and income drawdown) 6

complaints about investment-linked products

year ended 31 March number of complaints
2013 4,697
2012 3,308
2011 3,784
2010 6,329
2009 5,798
2008 2,750

annual change: +42%

Over the last decade or so we have usually seen the performance of the stock market broadly reflected in the number and type of investment-related complaints referred to us. For example, when markets have fallen we have seen more complaints from consumers unhappy about investments that they may have thought were safe losing value.

This year, however, stock markets have generally risen - but we did not see the fall in investment-related complaints that we might have expected.

A number of factors may have contributed to the 42% increase in complaints in investment-linked products over the year. While stock markets have generally performed well, wider economic concerns may have led some consumers to review the investment products they have been sold.

During the year we continued to see a significant number of complaints where an investment product was recommended that carried a level of risk that did not suit the consumer concerned. These disputes often involved disagreement between the business and the consumer about how the consumer's attitude to investment risk had been categorised at the point of sale.

In previous annual reviews we highlighted the number of complaints about investment-linked products where disputes had become increasingly entrenched and strongly contested. Despite this, we were able to resolve a significant number of long-running, complex cases during the year - involving consumers who had been advised to invest in controversial Arch Cru, AIG and Keydata funds.

complaints about mortgage endowments

year ended 31 March number of complaints
2013 4,657
2012 3,267
2011 3,048
2010 5,400
2009 5,798
2008 13,778

annual change: +43%

In last year's annual review we reported that the number of mortgage endowment complaints had increased slightly - by 7% - for the first time since 2004/2005. During the year the number of these complaints rose again - by a substantial 43%.

At the peak of complaints about mortgage endowments, in 2005, we were receiving up to 1,500 cases a week. This followed major publicity campaigns to make consumers aware that their endowment policy might not perform as they had expected it to - to pay off their mortgage.

So current levels of mortgage endowment complaints are still very low by comparison with those earlier years. These complaints now represent just 0.9% of our total workload - from a peak of 63% in 2005.

However, mortgage endowments still remain one of the most complained-about investment products. For many people referring complaints to us, the practical difficulties caused by mortgage "shortfalls" are only now starting to bite, as endowment policies they took out in the late 1980s - to repay 25-year mortgages - start to mature, usually with disappointing returns.

We are unable to look at many of these cases because the time limits set by the FSA, the regulator at the time, have already expired. These time limits were very widely publicised in campaigns throughout the mid 2000s - which included millions of "re-projection letters" (the so-called "red/amber/green letters") sent to consumers to warn 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.

During the year we found the majority of consumers had left it too late to bring their mortgage endowment complaint to us. And we upheld only 25% of these cases - lower than the average uphold rate across different financial products and services.

However, we saw some cases where the business involved was not able to provide us with evidence that the consumer had ever been told about the time limit for referring a mortgage endowment complaint. We made decisions on these complaints based on the individual circumstances.

complaints about pensions

year ended 31 March number of complaints
2013 4,401
2012 3,454
2011 2,706
2010 3,594
2009 4,825
2008 5,297

annual change: +27%

During the year we saw a significant rise in the number of pension complaints referred to the ombudsman service for the second year running. Complaints involving pensions are some of the most complex we deal with.

The amount of money at stake in pension disputes is also often substantial. Although we can now tell a business to pay a maximum of £150,000 compensation to an individual consumer - for new complaints we received from 1 January 2012 - some complaints involve substantially more money than this. Businesses may agree to settle any recommendation we make above this level - but the recommendation itself is not legally binding on them.

During the year the High Court considered the legal position in relation to losses exceeding our maximum compensation. This followed a previous High Court decision in 2010. A financial business is currently seeking clarification from the Court of Appeal on whether or not this means a consumer can pursue in court any compensation in excess of the ombudsman's maximum.

Long-running disputes are another feature of many pension cases we deal with - which often involve extensive legal representations and entrenched positions. Investment businesses regularly respond to these disputes by instructing highly experienced solicitors - and there is rarely any scope for resolving disputes informally.

In fact, pension disputes are more likely to require an ombudsman's final decision - as the last stage of our complaints process - than complaints about any other financial product.

Many of the complaints we saw involved problems that had arisen just at the point the consumer was about to retire - or had already retired and was relying on income from their pension. This means that delays and uncertainty can create more financial problems for them - and possibly financial hardship.

During the year we saw an increasing number of cases where consumers complained about advice they had been given to remove funds from their occupational pension schemes and invest instead in self-invested personal pensions (SIPPs). This often involved investing in unregulated collective investment schemes - including investments in European shopping centres and Spanish property developments.

complaints about whole-of-life policies

As in previous years, we continued to see a significant number of complaints during the year about "reviewable" whole-of-life policies - where reviews carried out by businesses, some years after the policies were originally 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 an increase in their premiums or a reduction in their life cover. We continued to see cases where the consumers concerned had not been clearly warned that a review might affect them in these ways.

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 stockbroking and portfolio management

year ended 31 March number of complaints
2013 2,428
2012 1,842
2011 2,267
2010 2,474
2009 2,078
2008 1,209

annual change: +32%

Despite relatively buoyant stock market conditions over the year, the number of disputes referred to us about stockbroking and portfolio management rose by a third.

These cases also involved a wider range of products than in previous years. They included contracts for difference, forex, film partnerships and off-shore unregulated traded life-policy investments known as "death bonds".

We also noted a number of more complex business relationships between firms and customers - giving rise to increasingly challenging issues of jurisdiction for us.

Establishing whether an individual consumer is eligible to bring a particular complaint to the ombudsman service - and against whom - is often our first step in resolving this type of dispute.