Monday, April 15, 2024
HomeEconomyFinancial Ombudsman Service increases complaint level predictions

Financial Ombudsman Service increases complaint level predictions

More complaints about financial firms are expected this year than was previously anticipated, according to an ombudsman service.

Gripes about perceived unaffordable lending, scams and motor finance are expected to feature in the Financial Ombudsman Service’s caseload.

When consulting on its plans in December last year, the service estimated it would receive around 181,300 new cases in the financial year 2024/25.

Following discussions with businesses and consumer groups, the free resolution service said the estimate has been increased to 210,000.

The predicted increase is due to several factors, including everyday financial concerns such as perceived unaffordable lending, credit card complaints, and fraud and scams, the Financial Ombudsman Service (FOS) said.

It is also a result of some motor finance commission cases which are not affected by the Financial Conduct Authority’s (FCA’s) review of historical practices coming to the ombudsman, the service added.

In the year ahead it’s likely that our service will see increasing levels of complaints

Abby Thomas, Financial Ombudsman Service

The FCA has launched a major investigation into whether people could be owed compensation for being charged too much for car loans, following a high number of complaints.

In January, it said it would look at historical discretionary commission arrangements in the motor finance market. If it finds widespread misconduct, the regulator has said it will make sure those affected receive settlements in an orderly, consistent and efficient way.

Before January 2021, some lenders allowed brokers (the person arranging the loan, for example, a car dealer) to adjust the interest rates they offered customers for car finance.

Typically, the higher the interest rate, the more commission the broker received. This was known as a discretionary commission arrangement.

Discretionary commission arrangements created an incentive for brokers to increase how much people were charged for their car loan – and the FCA banned this practice in 2021.

But the regulator has said there has since been a high number of complaints from customers about how much they were charged before the ban.

The FCA has put a pause on a deadline for motor finance firms to provide a final response to relevant customer complaints.

People can still complain to their provider, but they will not have to respond until after September 25, at the earliest.

A free motor finance reclaim tool has been placed on the website and by March 11 more than a million complaint emails had been sent via the tool.

The FOS expects to receive 149,200 banking and credit complaints in 2024/25, of which 13,900 are anticipated to be about motor finance commission falling outside the FCA’s review.

The ombudsman is also dealing with complaints faster.

It said it has reduced the time it takes to resolve a case from nearly five months in 2022/23 to just under three months by the last quarter of 2023/24.

It has set itself a new target of resolving 90% of cases within six months.

Abby Thomas, chief executive and chief ombudsman at the FOS, said: “In the year ahead it’s likely that our service will see increasing levels of complaints, with many of those disputes expected to focus on the critical issues that impact people’s everyday lives. This includes perceived unaffordable lending, concerns about car loan agreements, and disputes around fraud and scams.”

The service has committed to resolve 17% more cases in the year ahead than in 2023/24, up from 192,500 to 225,000.

The increased workload will be tackled partly by recruiting more case handlers, the service said.

The ombudsman also confirmed its intention to reduce the cost of its services to industry in 2024/25, including reducing its case fee by £100 per case to £650.

The service previously sought views on the possible exercising of new powers granted in the Financial Services and Markets Act, allowing the organisation to charge claims management companies and other relevant professional representatives.

Following feedback on the initial consultation, the ombudsman intends to consult on further detail in the first quarter of the new financial year.

Source link


Most Popular

Recent Comments