Ombudsman can come to the financial rescue for consumers
SO OFTEN the individual feels helpless in relation to an unfair money practice, bewildered by the terminology and browbeaten by the company concerned if an issue is raised. Yet help is at hand through the Financial Ombudsman.
Established by Parliament, the Financial Ombudsman (or FO) can look into most money problems – from payday loans and pensions to pet cover and payment protection insurance (PPI).
Its knowledge and experience should mean a matter is resolved fairly, informally and as quickly as possible. It tries to have a single person covering a case which makes it easier as a point of contact.
Initially, give the business a chance to respond to your concerns. However, if the matter is not resolved properly, contact the FO which is independent and unbiased. It says it will reach “a fair, pragmatic answer that helps both sides move on”.
There may have been a misunderstanding but if the aggrieved person has been treated unfairly, the FO has powers to correct the matter. This typically may be amending a credit file, reducing a loan payment, settling an insurance claim or correcting a pension.
In the recently released annual report, the FO says PPI has dominated much of its work and new cases “in the thousands each week” keep arriving but is down from the peak of a few years ago.
The chairman, Sir Nicholas Montagu, says that one of the most visible indicators of success is the satisfaction expressed by those whose complaint has not been upheld but who are pleased that they have been listened to and treated fairly.
The FO service is free to consumers. Taxpayers also make no contribution to its running costs. The income of £232.8m (£244.4m in the previous year) comes from case fees and a grant from the Financial Conduct Authority, which is obtained by a levy on financial firms. A £550 case fee is only charged if more than 25 complaints arise.
Four banking groups – Barclays, HSBC, Lloyds and Royal Bank of Scotland – create 50 per cent of all cases and pay a special rate. The groups cover many high street names. Lloyds, for instance, includes Bank of Scotland, BM Savings, Halifax, Intelligent Finance and Scottish Widows.
The total expenditure was £248.7m, slightly down on £270.3m from the previous year. The FO employs 3,682 staff, down from 4,334.
Away from the regular subjects, the FO has had to handle people affected by the collapse of holiday websites, those who have cancelled trips because of the Zika virus and dissatisfied drivers of electric cars.
Aside from PPI, the most striking aspect in the last year has been the rise in credit problems, says the Chief Ombudsman, Caroline Wayman, who was appointed in 2014 after being the Ombudsman’s legal director.
The volume of complaints arising from payday loans has risen three times whilst instalment loans and guarantor loans have soared by 318 and 182 per cent respectively.
In broad terms, the 321,283 new complaints split into four groups: PPI, 52.5 per cent Banking and credit, 31 per cent Other insurance, 12 per cent Investments and pensions, 4.5 per cent.
Holidays and related issues have increased markedly: foreign currency complaints are up 31 per cent from 90 to 118 and travel cover by 41 per cent.
Over 1.6m complaints about mis-sold PPI have been received. New grounds to complain arose from a Supreme Court judgment three years ago based on the commission a business received for the sale and if it was disclosed.
There were some bright areas where complaints fell notably, such as packaged bank accounts where the figure was under half the previous year.
Payday lenders have gained a reputation for opprobrium. The report cites a lady who took out a £300 loan and then four more with other payday lenders but was still significantly overdrawn.
The original lender claimed it had carried out an affordability assessment but when challenged could find no record.
The FO ordered all interest and charges applying to the second loan to be refunded plus interest, as well as to work out a fair and affordable way to repay the sum owed and ensure the credit file information was not adverse.
Far more instalment loan problems were raised as well as growing numbers of difficulties with guarantor loans.
Hire purchase finance agreements continue to cause concern with a reported 64 per cent rise – an increase from 3,072 to 5,029.
Overall there was a dramatic fall in the proportion of complaints that were upheld, reducing from 51 to 43 per cent. The notable reductions were PPI (66 to 52 per cent), travel insurance (48 to 38 per cent) and mortgage endowment (22 to 15 per cent).
There are several ways the FO tells companies to correct matters. In almost one-fifth of cases, the business was told to take action that did not involve a direct monetary value, such as correcting a credit reference.
In 15 per cent of complaints, it ordered up to £1,000 to be paid, rising to 15.5 per cent for £1,000£25,000, only rising to 2.5 per cent above that level.
Most frequently (46.5 per cent of cases), the FO told the firm either the basis or formula to apply for compensation, notably where specialist calculations needed to be made.
It upheld slightly more banking and credit complaints - 27 to 30 per cent – but fewer involving investment and pensions.
The one noticeable increase in the latter sector was for investment bonds which rose from 31 to 36 per cent.
New complaints in the banking and credit sector showed major problems still for current accounts, home loans, credit cards and savings accounts.
The insurance sector saw an encouraging reduction in the cases upheld, falling from 35 to 31 per cent. Cases involving contents cover (down from 33 to 26 per cent) and buildings insurance (reduced from 38 to 35 per cent) suggest that companies are handling complaints far more realistically.
Excluding PPI, the five major insurance-related complaints were for motor, buildings, travel, term and home emergency cover. Areas that often receive publicity – extended warranty insurance, income protection, private medical and roadside assistance – hardly featured.
Finally, independent financial advisers and intermediaries receive few complaints by comparison with such providers as banks, general insurers, consumer credit businesses and building societies.
The FO report should be a challenge to all of them to train better and respond more efficiently to complaints.
Financial Ombudsman Service, Exchange Tower, London E14 9SR (tel 0800 023 4567).