Shocking complaint figures for the UK financial services industry

September 7th, 2009

Figures have come to light this week which are remarkable. They show that more than nine million individual complaints were made to firms in the financial services industry in the period from 2006 to 2008.

The Financial Services Authority (FSA) has published the complaints figures for the first time and they show that banking and loans accounted for more than half the formal complaints made to financial companies in that period.

Regular readers will be aware of my stance regarding large banks and appreciate my total lack of surprise at this news.

By the second half of 2008, 40% of the complaints were being settled in the favour of the customer. The figures have been driven by huge numbers of complaints about bank overdraft charges, cash advance services and the mis-selling of payment protection insurance and mortgage endowments.

Individual companies will start to publish their own complaints data from July 2010.

The total number of complaints rose from 2,727,000 in 2006 to 3,411,000 in 2007 before dropping back last year to 2,903,000. There would have been more but for the fact that the FSA told regulated firms in the middle of 2007 that they did not have to include new complaints about charges for unauthorised overdrafts levied by banks and building societies.

More than 1.2 million of these complaints have since been “frozen” until the issue is settled by the courts.

A spokesman for the consumer group Which? has been quoted saying that, “it’s a poor reflection on the industry that there are so many unhappy customers out there. Financial firms simply aren’t treating consumers well enough and things must change if the industry is to rebuild its reputation.”

The FSA’s figures were dominated by complaints about current accounts, especially by demands for the return of overdraft fees, which reached 3,513,000 over the three-year period.

There were 908,000 complaints about the mis-selling of mortgage endowments during the period, although their number tailed off dramatically during the three years. Complaints about credit cards were the third most frequents at 745,000.

A surge in the number of complaints about payment protection insurance (PPI) saw the number of complaints about general insurance and “pure protection” policies double, from 62,000 to 127,000, between the first half of 2006 and the second half of 2008.

In April this year, the Financial Services Ombudsman (FOS), which deals with complaints that firms cannot settle themselves, accused many firms of being deliberately unhelpful.

The vast majority of industry complaints were settled within eight weeks with, by the end of last year, just 10% taking longer to deal with. Last year, the firms most likely to admit making a mistake were building societies, who settled 59% of complaints in their customers’ favour.

The figures are interesting in what they tell us about the current state of the financial services industry in the UK. Nine million complaints in three years is a tremendous amount and shows that financial companies, especially the banks, but also the FSA itself has a lot of work to do.

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UK debt level falls for the first time

September 1st, 2009

After last week’s worrying news about the ease with which people can get into debt, some more comforting news has emerged this week in that the total amount of personal debt in the UK has fallen for the first time since records began in 1993, the Bank of England has said.

Personal borrowing fell by £600m in July, taking the total owed by individuals down to a piffling £1.457 trillion. There was a drop in both mortgage debt and other forms of borrowing such as bank loans.

The number of mortgages approved in July rose again to 50,123, suggesting property sales will continue to rise. The amount outstanding on mortgages fell by £400m as people repaid more than they borrowed during July.

The amount accumulated on what is called consumer credit, such as loans and hire purchase agreements, dropped by a net £200m, once a small rise in credit card borrowing of £92m was taken into account.

The increasing number of mortgages approved, but not yet lent, is widely seen as a good indicator of future trends and indicates that the revival in sales seen this year will continue into the autumn.

However, the good news is not uniform across all sectors of the economy and population. Figures show that the debt burden of retired people in the UK is growing with a third in the red on loans and credit cards, according to a recent poll by Scottish Widows.

Retirees with outstanding non-mortgage debt owed an average of £7,344, up from £6,732 in the same poll a year ago. Some 15% of retired people are also still paying off a home loan, with an average debt of £50,100, up £8,000.

Some grown-up children are still financially reliant on their older parents, the poll also found. It suggested that 7% of retirees were still paying towards the upkeep of the children who have reached adulthood.

Those approaching retirement were also saddled with debt, Scottish Widows found, with 43% still paying off a mortgage. The average outstanding mortgage debt had fallen in a year, however, down from £58,300 to £57,000.

That the total debt of the British population has fallen for the first time since records began is really good news, although I do not expect the new trend to last. That older people are having more debt problems than ever is really concerning news and is something that financial institutions, in concord with Governmental agencies, should look at urgently.

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