13Mar

Guarantor loans are now most complained about product, according to FOS data

Guarantor loans were the most complained about product at the Financial Ombudsman Service in the third quarter of the 2020/21 financial year, which covers the period October to December 2020. FOS received 10,321 complaints about this product during the period.

There were 6,679 payment protection insurance complaints during the same period, making it the first time in 13 years that PPI had not topped the complaints league table.

These figures represent a massive change from 12 months previously, as in the third quarter of 2019/20 there were 41,510 PPI complaints and just 303 guarantor loan cases. It’s obvious why PPI complaints have fallen to one-sixth of their previous level, as it’s no longer possible to make a new complaint about this product to a firm, but the reasons why guarantor complaints have risen by a factor of 34 are less clear. It might be the increased profile of these products, greater willingness of customers to complain, claims management company activity or the effects of the pandemic, but whatever the reasons might be, the massive increase in complaints is undeniable, and firms in this area have had to adjust to a radically different world over the last 12 months.

In total, there were 72,498 new complaints during the third quarter. This is 5% higher than in the second quarter, but 13% lower than in the third quarter of the previous year.

Besides guarantor loans and PPI, FOS also received significant numbers of complaints about:

  • Home credit (6,091)
  • Current accounts (5,847)
  • Credit cards (4,270)
  • Travel insurance (2,378)
  • Car & motorcycle insurance (2,370)
  • Personal loans (2,347)
  • Hire purchase (2,146)
  • First charge repayment mortgages (1,928)
  • Point of sale loans (1,598)
  • Packaged bank accounts (1,522)
  • Payday loans (1,296)
  • Buildings insurance (1,247)
  • Instalment loans (1,228)

28% of the complaints closed by FOS during the third quarter were upheld. FOS recognises that it is still settling PPI cases in large volumes, and that the low uphold rate for this product – now down to just 9% – has the potential to distort the statistics, so it also publishes an uphold rate for all non-PPI cases, which is 39%.

The highest uphold rate was for home credit, at 84%. 63% of Self Invested Personal Pension cases were decided in favour of the customer but otherwise, every product area with an uphold rate of 45% or higher was in the consumer credit arena:

  • Guarantor loans (81%)
  • Running account credit (69%)
  • Instalment loans (68%)
  • Logbook loans (65%)
  • Conditional sale on motor vehicles (52%)
  • Personal loans (45%)

(This excludes some of the claims management company figures, where higher uphold rates were recorded in certain areas from very small numbers of cases)

At the same time, FOS published its firm specific data for July to December 2020. In recent years, when PPI dominated the complaints statistics, we have been used to the major high street banks having the highest complaints volumes. However, now we see that a major provider of guarantor loans received 12,854 complaints during the six-month period and a large doorstep lender had 10,390 complaints, and that both of these figures are higher than those recorded by any of the banking giants.

The firms with the highest uphold rates are:

  • A financial adviser specialising in unlocking pensions (90%)
  • The large guarantor lender responsible for the most complaints (88%)
  • A doorstep lender (86%)
  • A large electronics retail group (83%)
  • A logbook lender (81%)
  • A doorstep lender (80%)

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