Bank Customer Complaints in UK Soar 70% in Latest Quarter, Fueled by Credit Cards and Car Loans: Ombudsman
The Financial Ombudsman Service in the UK has reported a significant increase in complaints from bank customers regarding financial products, with a staggering 70% rise in the last quarter compared to the previous year. This surge in complaints is mainly attributed to disputes related to credit cards and car loans, highlighting the challenges faced by consumers in the current economic climate.
According to the ombudsman, nearly 75,000 complaints were lodged in the three months leading up to June, a substantial increase from the approximately 44,000 complaints received during the same period in 2023. Of these complaints, over 18,000 were related to credit cards and around 16,000 were linked to motor finance, indicating a growing trend in consumer dissatisfaction with these financial products.
Abby Thomas, the chief executive and chief ombudsman of the FOS, expressed concern over the high volume of complaints, particularly in light of the ongoing cost-of-living crisis. The FOS was established by the government to help resolve disputes between consumers and financial service firms, and the recent surge in complaints underscores the need for effective resolution mechanisms.
The increase in complaints comes at a time when British regulators are facing challenges in the financial sector, especially in the aftermath of past auto lending practices that have come under scrutiny. Consumers have alleged that their loans were unfairly priced, while banks benefited from discretionary commission arrangements with dealers, a practice that was banned in 2021.
The Financial Conduct Authority has issued warnings to motor finance firms to prepare for additional costs arising from its review of car finance products. Major players in the industry, such as Lloyds Banking Group Plc and Close Brothers Group Plc, have already set aside significant amounts for potential compensation and other costs related to the ongoing probe.
In addition to the concerns surrounding auto lending practices, the FCA has announced plans to investigate the sale of pure protection insurance products amid worries about commissions and product value. The Payment Systems Regulator is also addressing rising fraud claims and implementing measures to combat scams effectively.
The ombudsman has encouraged consumers to bring their complaints directly to the FOS, emphasizing that the service is free and can lead to favorable outcomes. While professional representatives play a crucial role in advocating for consumers, the ombudsman highlighted that cases brought directly to the FOS have a higher success rate compared to those represented by law firms.
As the FOS grapples with increasing operating expenses, it is considering implementing a case fee for professional representatives to help cover costs. The ombudsman’s funding model relies on a combination of case fees and annual levies paid by FCA-regulated businesses, with operating expenses projected to rise by 14% in the current fiscal year.
Overall, the surge in complaints from bank customers in the UK underscores the importance of effective consumer protection mechanisms and regulatory oversight in the financial sector. As regulators and financial institutions work to address these challenges, consumers are urged to voice their concerns and seek resolution through channels like the FOS to ensure fair treatment and accountability in the industry.