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annual review 2009/2010

1 April 2009 to 31 March 2010

chairman's foreword

In my foreword to last year's annual review, I wrote about the unprecedented levels of uncertainty in the financial markets at that time and the challenges that the economic turmoil and recession presented for financial businesses and their customers. These difficult times were the background against which we started the financial year 2009/2010 - the year covered in this annual review.

As part of our budget and workload planning before the start of the year, we consulted with external stakeholders on their views on what the year ahead would have in store for us. The businesses, trade associations and consumer groups who responded to our consultation in the early spring of 2009 agreed that we would need to plan and gear up for another year of continuing high volumes of cases and further volatility in what those cases involved.

This frank and realistic feedback from stakeholders was helpful. The general agreement on what the ombudsman service would be likely to face in the year ahead - in terms of the number and types of new cases referred to us by consumers - allowed us to plan with greater certainty for the budget and resources we would need to deal with the expected 44% annual increase in cases.

We started 2009/2010 expecting to receive 150,000 new complaints over the following 12 months. But we geared up to resolve 165,000 cases - including 15,000 carried over from the end of the previous year, when we received 40% more complaints than forecast.

We ended the financial year having received 163,012 new cases - 9% more than forecast and 28% higher than the previous year's record number. The figure is the highest number of new cases we have received during any year in our ten-year history.

By the end of the year we had settled and closed 166,321 cases - also a record number, and slightly higher than the figure anticipated in the budget. This number is 46% higher than the previous year's figure of 113,949 - and the largest number of cases we have ever settled in a year.

The larger-than-expected rise in workload over the year was driven by the continuing surge of complaints about payment protection insurance (PPI) and high levels of complaints relating to current accounts.

Following the tripling of PPI complaints in the previous year (2008/2009) - from 10,652 cases to 31,066 - we had planned on the basis that PPI complaints would fall in 2009/2010, as businesses increasingly understood and applied our approach to PPI complaints, and as the regulator, the Financial Services Authority (FSA), followed up the concerns we had raised about PPI complaints-handling under the formal "wider implications" procedure.

In the event, we received 58% more PPI complaints than in the previous year - a record 49,196 cases. This was double the number we had anticipated in our planning. PPI complaints made up 30% of our total workload during the year. We continued to uphold an unprecedented 89% of PPI cases in favour of consumers. There is more information about PPI complaints and the continued uncertainty in this area further on in this annual review.

The number of complaints relating to current accounts almost doubled during the year - resulting in over 25,000 new cases. We similarly saw a doubling of complaints involving consumer credit. A significant proportion of these complaints involved consumers in financial hardship - reflecting the economic climate and the harsher times faced by many consumers and businesses.

To be able to deal with these substantially higher caseload levels, we increased the number of our case-handling staff significantly during the year. We recruited 300 adjudicators on a permanent basis together with further contract and outsourced staff. In our budget consultation process, stakeholders agreed that this mix of permanent and contract staff is important in providing us with the flexibility to cope efficiently with the fluctuations in our workload.

As our output rises substantially, the importance of monitoring the quality and consistency of our work becomes even more important. During the year we organised over 30,000 hours of training for our staff, added 1,000 new pages to our staff intranet, and ran quality checks on 30% of cases as part of our quality-assurance framework.

A key measure of the customer service we provide is the timeliness of our complaints handling. Despite the heavy volume of new complaints and the inevitable lead-in time involved in recruiting and training the large number of new case-handling staff this year, I am pleased that our focus on timeliness has resulted in reduced waiting times for many consumers and businesses.

During the year we resolved 38% of cases within three months and 67% within six months - compared to 30% and 56% respectively in the previous year. We still want and need to do better than this. We have set ourselves increasingly tough timeliness targets for the financial year 2010/2011.

The focus on reducing waiting times for customers - and dealing with a higher-than-expected proportion of more complex and hard-fought cases - has involved greater investment in staff and resources, and a 9% annual increase in our unit cost.

However, subject to casework uncertainties we expect to see the unit cost fall next year as the result of a range of improved efficiency measures and increased productivity, with our recently-recruited case-handlers reaching their full potential. We are expecting the same factors to lead to improved standards of service for our customers, something which our chief ombudsman writes about in her report.

In the last few annual reviews I have written about the work we have done in response to the independent review that we asked Lord Hunt of Wirral to carry out in 2007/2008. Lord Hunt looked at the accessibility and openness of the ombudsman service and set out a series of recommendations that we described at the time as a bold agenda for change. We remain committed to a wide range of accessibility and openness initiatives suggested by Lord Hunt.

For example, during the year we published - for the first time - "business specific" complaints data showing the number of new cases, and uphold rates, for each of the 150 or so financial businesses that together generate some 90% of our workload.

In the light of Lord Hunt's particular interest in our website as a tool for accessibility and transparency, I was also especially pleased that following nominations from the public, our website was named website of the year 2009 in the Plain English Campaign's annual awards.

As part of this annual review we have published in full the separate report of the independent assessor, Michael Barnes. The independent assessor's role is to investigate complaints from businesses and consumers about the level of service provided by the Financial Ombudsman Service - in cases that our in-house service-review team has itself been unable to resolve.

The independent assessor reports directly to me and my board colleagues. As in previous years, all the independent assessor's recommendations have been accepted - both in relation to individual cases and, more generally, in relation to the service we provide.

Michael Barnes retires this year after eight years as our independent assessor. This means that this is his last annual report to my board. I am very grateful to him for his observations and insights over the years. The independent assessor provides a valuable mechanism for feedback and scrutiny on all aspects of our performance. Michael Barnes' successor, who is shortly to be appointed, will continue to have the close interest and attention of the board.

My final words are to record my personal thanks - and the thanks of the board and the staff - to Walter Merricks, who stepped down as chief ombudsman in October 2009 after ten years in the post. For many people, I know that Walter was the Financial Ombudsman Service - because he was so closely identified, at every level, with the organisation he set up and led with such pride, passion and charisma.

I am confident that Natalie Ceeney, who joined in March 2010 as the new chief ombudsman and chief executive, is the right person to take the Financial Ombudsman Service into the challenges of the new decade. I am also very grateful to David Thomas, who led the ombudsman service very ably as interim chief ombudsman in the period before Natalie Ceeney arrived.

Sir Christopher Kelly KCB
May 2010