UK financial firms should review complaints procedures following FOS report

It follows the publication of the Financial Ombudsman Service’s (FOS) annual complaints data and insight, with the report showing the most common and emerging issues consumers face when dealing with financial firms.

Anthony Harrison, financial services regulatory expert at Pinsent Masons, said: “The FCA often reviews complaints trends observed by the FOS, alongside claims trends with the Financial Services Compensation Scheme, to inform areas of enhanced supervisory scrutiny in respect of potential consumer harm. We can expect to FCA to question the approach taken by financial institutions to understand the recorded complaints, in particular where these are upheld at higher rates by the FOS. Firms should take note of these trends and consider whether complaints received might highlight areas for potential improvements in controls.”

The FOS received nearly 200,000 new complaints in the last financial year, representing a 20% increase from the previous year, with the increase in complaints recently prompting the FOS to outline plans to resolve cases faster. The majority of complaints were about banking and payment products, followed by consumer credit, insurance, pensions and investments.

Jonathan Cavill, financial services expert at Pinsent Masons, said: “Unsurprisingly, in the current cost of living climate, complaints have particularly increased in respect of perceived concerns regarding irresponsible or unaffordable lending. This data echoes concerns the FCA has raised in recent months. We continue to expect increased FCA attention around firms’ approach to assessing affordability and suitability of products for consumers.”

The top five most complained about products were current accounts, credit cards, hire purchase motor agreements, car or motorcycle insurance and conditional motor sales. The overall uphold rate was 37%, which represents an increase on the 35% uphold rate recorded in 2022-23.

In respect of banking and payments, consumers particularly complained about “administration and customer service followed by perceived unaffordable or irresponsible lending by financial firms”, with unaffordable lending driving credit card complaints. There has also been an increase in the number of cases about fraud and scams, including authorised push payment scams. These scams involve consumers being tricked into transferring money to a fraudster who is posing as a genuine payee.

In the credit complaints space, motor finance commission complaints accounted for most of the hire purchase complaints, with the FOS noting that 90% of these were submitted by professional representatives. By contrast, there was a significant increase from 1,900 to 7,829 in complaints in respect of conditional motor sale products in 2023-24. Over half of these related to perceived irresponsible or unaffordable lending.

Finally, there has been an 18% increase in complaints about insurance products, with car and motorcycle complaints in particular increasing by 38%. The FOS comments that complaints trends here focus on claim delays, claim payouts, and declined claims.

In the 2023-24 period, 25% of complaints were brought to the FOS by claims management companies, which is an increase from the 18% in 2022-23 – a trend which has recently prompted the FOS to propose charging claims management companies to lodge a case.