Complaints to the Financial Ombudsman Service (FOS) in the first quarter of the 2019/20 financial year – the period 1st April to 30th June – are approximately 70,000, down 37,000 on last year’s total for the same period, but 23,000 of this reduction is accounted for by a fall in payment protection insurance (PPI) complaints. PPI remains the most complained about product, but it now accounts for less than half of the new cases being taken on by the FOS. Current accounts and payday loans are respectively the second and third most complained about products.
The uphold rate across all areas is 30% but the Service says ‘a high proportion’ of credit complaints are being upheld, without stating the exact proportion for the sector as a whole. The PPI uphold rate, which was in excess of 70% some years ago, is now just 19%.
The latest FOS bulletin contains some limited statistics about claims management complaints. The FOS has only been responsible for handling complaints in this area since April 1 this year. PPI is the only area in which more than 30 new claims management complaints have been made during the first quarter. The FOS has received 117 complaints related to PPI and upheld 43% of the cases it closed in this area, so it appears that, for now at least, claims management companies have a higher uphold rate than the average firm. 94 complaints were received about claims activities other than PPI.
The FOS says many of the claims management complaints it has seen are from consumers who may have been scammed by an unauthorised CMC – people might say for instance that they were told to pay an upfront fee with the promise of a large PPI payout to follow.
Perhaps the most startling figure in the first quarter FOS data is the uphold rate of 83% on guarantor loans, when it was only 32% in the previous financial year. The Service says it is being contacted by guarantors who might claim one or more of the following:
- The loan was approved even though it was not affordable for the borrower and/or guarantor at the time of the application
- The lender failed to clearly explain what the responsibilities of a guarantor were, i.e. that they would be called upon to make payments if the borrower was unable to, and would become responsible for repaying the full amount if the borrower defaults on the loan
- The guarantor was forced into carrying out that role by the borrower
- Loan repayments have become unaffordable due to a change in the borrower’s or guarantor’s circumstances, but the lender is not treating the customer fairly when it comes to alternative repayment arrangements
When upholding a guarantor loan complaint, the FOS might demand that the lender releases the guarantor from their commitments, and/or pays compensation and/or removes the loan from the guarantor’s credit file.
Guarantor loans are not the only area of consumer credit where the uphold rate has risen. 73% of instalment loans complaints were upheld between April and June 2019, compared to 65% between April 2018 and March 2019. Home credit uphold rates have risen from 39% to 67% over the same period, while payday loan upholds are up from 53% to 62%, hire purchase upholds have risen from 44% to 47%, point-of-sale upholds from 53% to 56% and credit broking upholds from 28% to 36%.
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.