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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