On 3 June, the Financial Ombudsman Service (FOS) published its annual summary of complaints data. The data, available on the Ombudsman’s website, outlines the nature and number of complaints the Ombudsman receives about financial services firms.
This data always provides a good snapshot of the products and services that customers are having issues with. Here we look at the complaints the Ombudsman has been receiving, and what insight they offer for financial services Compliance teams.
What is the FOS?
The Service was set up by Parliament to sort out complaints between financial services firms and their customers. It was established in 2000, and given statutory powers in 2001 by the Financial Services and Markets Act 2000.
Latest complaints data – looking at the figures
The 2019/2020 figures show that:
- The FOS received over 270,000 new complaints about financial businesses in the 2019/20 financial year, down from more than 388,000 new complaints in 2018/19.
- As in previous years, Payment Protection Insurance (PPI) was the most complained-about product, with over 122,000 complaints. This is closely tied to the FCA’s August 2019 deadline for making PPI complaints – something we also saw in the Financial Conduct Authority’s (FCA) most recent complaints data in October last year.
- Some types of loan saw year-on-year increases in the number of complaints, including instalment loans (10,880 complaints received in 2019/20), guarantor loans (1,043 complaints received in 2019/20) and point of sale loans (4,667 complaints received in 2019/20).
- 295,596 complaints were resolved, compared to 376,352 in 2018/19.
- 32% of complaints were upheld in favour of the consumer.
Commenting on the latest data, FOS chief ombudsman and chief executive Caroline Wayman said that the themes and trends it displays ‘contain vital lessons about what fairness looks like and how disputes might be prevented’.
For financial services, this returns to an ongoing theme. Fair treatment of customers is a central tenet of the FCA’s approach; the regulator recently wrote to financial services CEOs reminding them of their obligations around its Treating Customers Fairly rules.
In her summary, Wayman noted that: ‘Before Covid-19 was on our horizon, we’d also been hearing from tens of thousands of people struggling with unmanageable levels of debt. During a year when we saw yet more lenders sink under the weight of past unfairness, we continued to raise concerns with firms in this sector about the disappointing proportion of cases where they’d failed to ensure customers’ borrowing was affordable and sustainable’.
For firms operating in the consumer credit industry, there are lessons to be learned around suitability, especially in relation to vulnerable consumers.
This is another area that’s also on the FCA’s radar: ‘ensuring consumer credit markets work well’ is one of the priorities set out in its 2020/21 Business Plan. Any Compliance professionals in the consumer credit industry will want to stay on the front foot when it comes to compliance with the regulator’s rules.
Wayman believes that ‘It’s time now for these lenders to genuinely prioritise customers’ long-term interests’, with the ‘potential for borrower vulnerability in the wake of Covid-19’ making this not ‘just important, but essential’.
When it comes to PPI complaints, the Ombudsman recognises that ‘encouragingly, businesses had reached fair outcomes in a greater proportion than the previous year’.
You can read the full FOS analysis of its latest data on its website.
Looking to the future
Alongside the complaints data, the FOS has published its future strategy.
Titled ‘Contributing to a fairer financial world’, the strategy document continues the focus on fair treatment, and sets out the Service’s three strategic priorities:
- Enhancing the service
- Preventing complaints and unfairness arising
- Building an organisation with the capabilities it needs for the future
Treat customers fairly to minimise the chances of regulatory breaches and complaints
It’s clear that the fair treatment of customers underpins much of what the FOS – and the FCA – want to see from firms.
If this is something your business wants to brush up on, our tips on how to achieve the FCA’s 6 desired consumer outcomes have good advice, including how you can develop your culture and financial promotions to encourage fairness.
You should also prioritise:
- Ensuring your promises are fair and your services and solutions deliver on them. Your financial promotions need to comply with the requirements. If you think this might stifle your creativity, read our blog on marrying creativity with compliance for ideas.
- Creating advice and sales processes that meet regulatory requirements. Misleading financial promotions have been in the spotlight recently– make sure yours measure up. We explored recently why trust in advertising might be more important than ever.
- Understanding the rules around disclaimers and disclosures; small print can be vital in ensuring customers know what they can expect.
- Making compliance not just about printed publications. The FCA rules are platform-neutral, meaning that digital marketing, including your website and social media strategy also need to comply. Read our blog on Twitter and compliance – secrets of social media success for advice on engaging social media that follows the rules.
- Staying aware of what’s coming down the line.
- Exploring whether you can use innovation and regulatory technology to improve your regulatory compliance, making your review and approval processes more efficient and – importantly – more watertight.
Create fair, compliant financial promotions
LS Consultancy has wealth of experience in reviewing financial promotions and can do so on a one-off or on an on-going basis.
We are also skilled in reviewing and assessing your financial promotion procedures and can assist you to establish the necessary framework to help future compliance with regulatory requirements.
Remember: Not everything is black and white when it comes to Financial Promotions, and many of the rules are open to interpretation. If you are unsure how your activities fit within the rules, please contact us.