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The FOS – annual review, far from positive!

The Financial Ombudsman Service [FOS] has issued its annual review 2016/2017. This year’s version attracts the catchy title, “fairness in a changing world”. The report always attracts intense scrutiny, in particular from industry observers and consumer champions. These parties are, as always, interested to see if the various initiatives from legislators and regulators are starting to have a positive effect on the way financial firms treat customers. Interested parties will want to see that the culture of the financial service industry is changing.

Detailed reading – Look deeper!

There will be those who read the report optimistically, having focused on the reducing headline number of new complaints. On detailed reading, that is not the correct position. True, the number of new complaints is down from half a million in the year 2013/2014 to 321,283. However, to really understand if the culture of the financial service industry is changing one needs to look deeper than the headline new complaint number. The headline figure will become even more mis-leading. For example, the number of new complaints will plummet in two years’ time as the Financial Conduct Authority [FCA] pulls the shutters down in new Payment Protection Insurance [PPI] complaints. That does not mean that customers are being treated better than they were in the past, in fact consumer groups point out that the ‘time bar’ is fundamentally ‘unfair’ in itself. Sadly, the risk is the time bar will give the illusion of progress while the underlying issues remain the same.

Far from positive news

The bottom line is that the PPI position masks the underlying trends in respect of other complaints. The sales of PPI are historic and it is how firms are dealing with customers now that matters. Over the last three years, the data shows that, banking and credit complaints have nearly tripled, insurance complaints (excluding PPI) have doubled and investment and pension complaints have increased. This is far from positive news.

Where do the complaints come from?

When considering complaints received at FOS, it is too easy to forget that FOS are a home of last resort in that the firm has had the chance to consider and resolve the complaint before the matter is referred to FOS for an independent view. Despite that, 60 firms still generate more than 500 complaints each and out of the 56,000 businesses covered by FOS 50% of the complaints came from just 4 business groups. On the basis that firms have had a chance to fix the complaint before it gets to FOS the uphold in favour of the consumer percentages remain a cause for concern. These percentages show that firms are too often rejecting legitimate complaints. One only has to look at the time that it takes FOS to resolve a complaint to see that this in itself causes significant consumer detriment. For example 33% of PPI complaints have been at FOS more than 2 years (an increase from 20% in the 2015/2016 period).


Sir Nicholas Montagu KCB [FOS Chairman] states in the annual report, “The past year, like its predecessors, has been immensely demanding as a look at the bare figures shows”. He is correct and I suspect the years ahead of us will be as ‘immensely demanding’. The right way to reduce the number of new FOS complaints is refocus financial firms on ‘doing the right thing’ for customers in the first place and ensuring that they put things right for customers when things go wrong (without the need for a FOS referral).

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