FOS data shows high complaint uphold rates for credit activities

The Financial Ombudsman Service (FOS) has released details of the complaints it has received up to December 31 2014, representing the first three quarters of its financial year, which runs from April 1 to the following March 31.

The FOS can be asked to adjudicate on a complaint by any customer who is not satisfied with the way an authorised financial services firm handled the matter. It has found in the customer’s favour on 53% of complaints it closed between April to December.

The highest uphold rate for any single product area is 87%, for card protection products. Yet many of the next highest figures relate to consumer credit. The relevant figure for debt adjusting was 65%, for payday loans it was 66% and for credit broking 64%. Broking has also seen a significant rise in the numbers of people contacting the FOS, with 16,358 enquiries made in the period April to December, compared to just 6,376 in the whole of the previous 12 months.

The FOS has raised the issue of the activities of credit brokers, especially those in the payday loan sector, on previous occasions. Concerns have been raised about brokers charging fees to customers for whom they were unable to obtain a loan, and about brokers passing customer details to other brokers without permission.

Senior ombudsman Juliana Francis said:

 

“It’s disappointing to see that more and more people are being misled into thinking that these credit broking websites will get them a loan. In too many of the cases we sort out, no loan is provided and people’s bank accounts have been charged a high fee, often multiple times.”

Whilst consumer credit only became regulated by the Financial Conduct Authority (FCA) in 2014, the FOS has been able to adjudicate on credit complaints since 2007.

When judging complaints, the FOS does not just consider whether the firm complied with the rules that applied at the time. A key part of its assessment is whether the firm’s actions were ‘fair and reasonable’, which is in many ways similar to FCA Principle 6, which requires firms to treat customers fairly at all times.

Firms wishing to avoid having complaints upheld by the FOS should ensure that customers are treated fairly at every stage of the process. This includes:

  • Being transparent at the start of the client relationship regarding the services to be provided, the interest rates and required repayments, and the fees to be charged and how these are calculated
  • Not making misleading claims or statements in marketing communications or customer disclosure documents
  • Carrying out rigorous credit and affordability assessments before deciding whether to lend money
  • Ensuring that borrowers in arrears are dealt with compassionately

They should also ensure that their own procedures for assessing complaints and offering compensation are designed with the fair treatment of customers in mind.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.