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annual review 2013/2014

1 April 2013 to 31 March 2014

what the complaints were about

new cases by area of complaint

type of complaint 2014 2013 2012 2011 2009
banking and credit 13% (65,077 cases) 15% (77,176 cases) 24% (64,234 cases) 31.5% (65,063 cases) 43% (55,038 cases)
investments and pensions 3% (15,938 cases) 4% (19,834 cases) 6% (14,862 cases) 7.5% (15,483 cases) 17.5% (22,265 cases)
insurance excluding PPI 6% (31,213 cases) 7% (33,172 cases) 10% (27,563 cases) 10% (20,978 cases) 15% (19,102 cases)
payment protection insurance (PPI) 78% (399,939 cases) 74% (378,699 cases) 60% (157,716 cases) 51% (104,597 cases) 24.5% (31,066 cases)
new cases in total 512,167 508,881 264,375 206,121 127,471

year ended 31 March

new cases by financial product

  %
payment protection insurance (PPI) 78
complaints about all other financial products 22

new cases involving financial products other than PPI

  %
current accounts 17.5
mortgages 11
credit cards 9.5
consumer-credit products and services
(eg hire purchase, debt collecting and catalogue shopping)
7
motor insurance 6.5
unsecured loans 5.5
buildings insurance 3.5
pensions 4
mortgage endowments 3
savings accounts 3
term assurance 3
travel insurance 2
whole-of-life policies and savings endowments 2
contents insurance 1.5
“with-profits” and unit-linked bonds 1
other products 20

what issues the cases involved

payment protection insurance (PPI): 78%

of which

  • complaints about sales and advice: 99%
  • other complaints: 1%

insurance (excluding PPI): 6%

of which

  • complaints about claims: 52%
  • complaints about sales and advice: 31%
  • complaints about administration: 17%

banking and credit: 13%

of which

  • complaints about charges: 36%
  • complaints about administration: 23%
  • complaints about sales and advice: 16%
  • complaints about transactions: 10%
  • other complaints: 15%

investments and pensions: 3%

of which

  • complaints about sales and advice: 64%
  • complaints about administration: 28%
  • other complaints: 8%

new cases by financial product

new cases by financial product year ended
31 March 2014
year ended
31 March 2013
annual change
payment protection insurance (PPI) 399,939 378,699 up 6%
current accounts
including complaints about:
19,878 19,560 up 2%
- "packaged" accounts 5,667 1,629 up 248%
- direct debits and standing orders 534 651 down 18%
- business banking charges 225 495 down 55%
mortgages 12,606 11,920 up 6%
credit cards 10,472 19,634 down 47%
consumer credit
including
complaints about
7,630 8,470 down 10%
- point-of-sale loans 1,418 1,939 down 27%
- hire purchase 1,511 1,621 down 7%
- payday loans 794 542 up 46%
- catalogue shopping 792 950 down 17%
- credit broking 649 711 down 9%
- debt collecting 557 817 down 32%
- debt adjusting 530 484 up 10%
- store cards 466 650 down 28%
- hiring, leasing and renting 291 304 down 4%
- home credit 138 98 up 41%
- credit reference agencies 131 109 up 20%
- debt counselling 95 126 down 25%
motor insurance 7,190 7,785 down 8%
unsecured loans 6,310 7,809 down 19%
pensions
including complaints about
4,361 4,401 down 1%
- personal pension plans 1,748 2,207 down 21%
- small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 1,039 697 up 49%
- annuities 601 624 down 4%
- SERPS 527 476 up 11%
- free-standing additional voluntary contribution (FSAVC) schemes 172 95 up 81%
- income draw-down 169 189 down 11%
- pension mortgages 95 100 down 5%
buildings insurance 4,095 4,611 down 11%
savings accounts 3,611 4,967 down 27%
mortgage endowments 3,573 4,657 down 23%
other banking services
including complaints about:
3,517 3,838 down 8%
- debit / cash cards 1,177 1,285 down 8%
- money transfer 952 1,036 down 8%
- cheque clearing 569 686 down 17%
- electronic payment 435 400 up 9%
- safe custody 105 120 down 13%
- foreign currency 94 113 down 17%
term assurance 3,426 3,572 down 4%
investment-linked products
including complaints about:
3,104 4,697 down 34%
- investment ISAs 929 1,528 down 39%
- unit-linked bonds 791 1,030 down 23%
- "with-profits" bonds 304 675 down 55%
- guaranteed-income bonds 419 580 down 28%
- unit trusts 109 165 down 34%
- PEPs 55 132 down 58%
- "structured" products 52 108 down 52%
whole-of-life policies and savings endowments 2,479 3,241 down 24%
travel insurance 2,271 2,742 down 17%
contents insurance 1,771 2,027 down 13%
income protection 1,439 1,481 down 3%
home emergency cover 1,387 1,284 up 8%
commercial vehicles and property 1,301 1,319 down 1%
portfolio management 1,166 1,449 down 20%
card protection insurance 1,118 n/a n/a
secured loans 1,053 925 up 14%
private medical insurance 988 949 up 4%
stockbroking 913 979 down 7%
critical illness insurance 906 1,370 down 34%
extended warranty insurance 755 903 down 16%
pet and livestock insurance 720 830 down 3%
legal expenses insurance 707 907 down 22%
roadside assistance 668 490 up 36%
mobile phone insurance 551 615 down 10%
personal accident insurance 477 495 down 4%
building warranty 384 206 up 86%
derivatives
including complaints about:
342 463 down 26%
- interest-rate hedging products 135 258 down 48%
- spread betting 126 148 down 15%
business protection 274 261 up 5%
guaranteed asset protection ("gap" insurance) 247 309 down 20%
caravan insurance 81 79 up 3%
total number of new cases 512,167 508,881 up 1%

what the complaints were about: insurance

Complaints about insurance - including payment protection insurance (PPI) - made up 84% of all the new cases we received during the year (81% in the previous year).

PPI accounted for 93% of all the insurance complaints we received - with other insurance products accounting for the remaining 7%. These are similar proportions to those we saw in the previous year.

The tables below show how these complaints were spread across the different types of insurance
type of complaint %
payment protection insurance (PPI) 93
all other insurance-related complaints 7
type of complaint %
motor insurance 23
buildings insurance 13
term assurance 11
travel insurance 7
contents insurance 6
home-emergency cover 4.5
income protection 4.5
commercial vehicle and property insurance 4
critical illness insurance 3
private medical insurance 3
extended warranty insurance 2.5
legal expenses insurance 2.5
pet insurance 2.5
mobile phone insurance 2
roadside assistance 2
personal accident insurance 1.5
guaranteed asset protection ("gap" insurance) 1
other (including business protection, building warranty and caravan insurance) 7

PPI aside, the number of general insurance complaints has been relatively steady during the year. We haven’t seen any major new issues arising, and our approach in most areas is well known and published on our website.

It is always disappointing to see a case referred to us where the circumstances suggest that our usual approach would apply - and the complaint could have been resolved much earlier if that approach had already been followed by the business.

During the year we have been working closely with the insurance sector to help improve their understanding of the way we look at insurance complaints - including, for example, issues like “non-disclosure” and fraud.

We continue to see disputes where fraud is central to the issues involved. Fraudulent claims present a significant challenge for many insurers. But alleging that a policyholder has claimed fraudulently is just as serious a matter.

Sometimes it’s clear in the cases we see that an insurer thinks a consumer’s claim is fraudulent. But rather than say so outright, they focus instead on what the consumer hasn’t disclosed - and reject the claim straight away.

We have worked with insurers to explain our approach to these sorts of cases. We take the view that a consumer should be given an opportunity to explain any inconsistencies in their account of what happened. After all, there may well be an innocent explanation. People can make mistakes, and insurers are not always clear in what they’re asking the consumer to tell them.

Some insurers (and indeed solicitors) seem surprised that fraud must be established to a high degree of probability. But that is the law - and we must take the law into account when we make our decisions.

During the year we also received over a thousand complaints about card protection policies - an area where we hadn’t had significant involvement before. Many of the consumers who complained to us about card protection said they wouldn’t have taken out a policy to protect their cards against fraud if they’d been told about the automatic legal protection they already had in relation to their cards.

Our work with insurers over the year focused on what can be learnt from complaints - and how insurers can help improve customer service in the future. For example, as we highlighted in the December 2013 issue of ombudsman news, the proportion of cases we upheld against one particular mobile phone insurer halved - once it had acted on our feedback on its handling of customer complaints. This is an area where we continue to uphold a high proportion of cases in the consumer’s favour.

We also found that by telling a particular home emergency insurer exactly what our approach would be, complaints about a specific problem we’d expected to be referred to us were sorted out much earlier - and without the need for our formal involvement.

Similarly, we have been looking at issues involving the “auto-renewal” of insurance policies. Our aim in this area is to help insurers prevent problems themselves by being clearer with their customers about how auto-renewal works.

payment protection insurance (PPI)

year ended 31 March number of complaints
2014 399,939
2013 378,699
2012 157,716
2011 104,597
2010 49,196

In our last few annual reviews we have reported receiving unprecedented volumes of new PPI complaints. This year is no different. Once again, we received more PPI complaints than ever before. In 2013/2014 consumers referred 399,939 new PPI complaints to us - a slight increase of 6% on the number in the previous year.

At its peak last year we were receiving more than 12,000 new PPI complaints every week. In recent months this has fallen to around 6,000. After consulting businesses and other stakeholders, our current plans assume that new complaint volumes will continue to fall over the coming year.

However, we know that the challenges of PPI will be with us for some considerable time to come. In total we’ve now received more than one million PPI complaints - and we received two thirds of those during the last 18 months.

We’ve spent the last two years increasing our case-handling capacity significantly. During 2013/2014 we recruited nearly 1,000 new adjudicators - who joined the 1,000 adjudicators we recruited during the previous year. This has doubled the size of the ombudsman service. We’ve also invested in the support services and other functions that keep our organisation running efficiently.

This investment has helped us resolve 389,730 complaints - double the number we settled in the previous year. But even so, the scale of the PPI challenge means we ended the financial year with a stock of 400,000 PPI cases. This means many people are waiting far longer than we’d like. And we’ve worked hard to let businesses and consumers know what they can expect to happen. This has included:

  • A section on our website called “your PPI case with us: what's happening?” - with updated FAQs and videos.
  • A regular e-newsletter to people who have signed up for updates on PPI-related developments in general.
  • Seminars for smaller businesses and claims managers to help them better understand the ombudsman’s approach to handling PPI complaints.
  • A "behind the scenes" tour of our offices for people waiting for us to deal with their complaint - for them to see at first hand the efforts we’re making to resolve cases fairly and quickly.

Our ability to resolve PPI cases efficiently is heavily dependent on how businesses and claims managers handle complaints in the first place.

Once again, the proportion of PPI cases we upheld in favour of the consumer varied significantly from business to business - from 2% to 97%. Although we’ve seen encouraging signs that some businesses have improved the way they handle PPI cases, we are still concerned that not all are following our well established approach - which was upheld by the courts three years ago.

We’ve continued to see a substantial proportion of PPI complaints referred to us by claims-management companies. These are commercial companies who charge a consumer for bringing us their complaint - something we know consumers can do just as easily and effectively for themselves.

Some claims managers have adapted their procedures to better represent the interests of their clients. But it’s disappointing that we still see examples of other claims managers making little effort to set out the details of their client’s complaint - and supplying only general information rather than specific details about the case in hand.

To help improve this situation, we issued guidance jointly with the Ministry of Justice, the Financial Conduct Authority, and the Financial Services Compensation Scheme. This guidance - which is available on our website - sets out what is expected in complaints that are represented by a paid-for third party.

Where we’ve seen a financial business or claims manager doing things that are unsatisfactory or simply unreasonable, we have referred the issues to the relevant regulator.

During the year we’ve been finding that a higher proportion of PPI complaints are raising issues about the way the business calculated redress - rather than about the original mis-selling of the PPI policy. We’ve also seen more cases where the business is disputing whether we can look at the complaint in the first place.

We know that PPI is likely to raise increasingly complex issues like these over the coming years, and we have plans in place to make sure we’ll be able to deal with these issues effectively.

motor insurance complaints

year ended 31 March number of complaints
2014 7,190
2013 7,785
2012 7,264
2011 5,784
2010 5,451

We see more complaints about car and motorcycle insurance than any other area of insurance - except for PPI. And we find in the consumer’s favour in a relatively high proportion of these cases. This is why we’ve continued to work with motor insurers during the year to make clear how we approach these cases. Our aim is to help insurers resolve their customers’ complaints themselves - without the need for the ombudsman’s involvement.

Disappointingly, we still see a lot of insurers continuing to make forceful arguments in complaints involving “non-disclosure” - even though our long-standing approach is now reflected in the Consumer Insurance (Disclosure and Representation) Act 2012, which came into effect in April 2013. A detailed note about the Act and our approach has been on our website for the past year.

During the year we continued to see complaints about delays and poor communication when a consumer made a claim to their insurer. Unnecessary delays are frustrating enough for a consumer. But it’s even more inconvenient for them if their insurer continues to insist on its right of appeal - and an ombudsman has to make a final decision. We will continue to work with insurers to help them better understand the impact that unnecessary delays can have on the day-to-day lives of their customers.

complaints about buildings and contents insurance

year ended 31 March buildings insurance complaints
2014 4,095
2013 4,611
2012 4,556
2011 3,469
2010 3,437
year ended 31 March contents insurance complaints
2014 1,771
2013 2,027
2012 2,089
2011 1,697
2010 1,863

During the year we’ve continued to see problems arising where insurers instruct someone else to act on their behalf. We’ve seen complaints where insurers have failed to take responsibility for the actions (or inaction) of their agents - for example, where investigations by loss adjusters appointed by insurers haven’t been as thorough as they should have been.

In these cases, the loss adjusters often tell us that they received poor instructions from the insurer. Many problems could be prevented by insurers being very clear from the outset on the scope of the work they want the loss adjuster to carry out.

Better communication would also help consumers when their claims are turned down. In the complaints we see, we often find that the insurer hasn’t explained clearly exactly why the claim was rejected. In our experience, not many consumers understand technical terms like “insured peril”. And in many cases we see, a straightforward and timely explanation could have prevented a complaint from arising in the first place.

Good communication will be increasingly important as insurers start work on the claims arising from the recent flooding and storms. Keeping consumers fully informed can help avoid unnecessary problems during the months of drying-out and disruption that these claims inevitably involve.

travel insurance complaints

year ended 31 March number of complaints
2014 2,271
2013 2,742
2012 2,431
2011 2,536
2010 2,003

Travel insurance policies are often complex products - and consumers tend to buy them when their attention is more focused on their holiday. We know the travel insurance sector is keen to simplify their products and we continue to share our insights in this area.

During the year we again saw a significant number of complaints involving “pre-existing medical conditions” - especially in relation to people who weren’t actually travelling. Consumers can be surprised and upset to find that they might not be able to claim for a holiday they had cancelled because of a relative’s medical condition.

In these situations, insurers must be clear about what they expect the consumer to disclose - bearing in mind, of course, that someone can only disclose what they actually know. Not everyone has details of their relatives’ health conditions. When we look into these cases, we consider very carefully what the consumer knew about the health of the relative in question at the time they took out the policy.

health and medical insurance complaints

year ended 31 March number of complaints
2104 3,333
2013 3,800
2012 2,295
2011 1,754
2010 2,026

Alcohol continued to feature prominently in travel insurance complaints during the year. In many cases we saw, insurers had clearly assumed immediately that certain injuries must have been alcohol-related. We know that some overseas hospitals can be un-cooperative where blood tests are concerned. But in the absence of evidence from blood alcohol tests, we still look to see what evidence the insurer relied on when they made their decision - including evidence from witnesses and CCTV footage where appropriate.

Complaints involving protection products continued at high levels during the year - largely as a result of consumers mistaking some of these “protection” policies with payment protection insurance - PPI.

Some complaints involved consumers who had made a claim - and were surprised to find that the cover their policy offered had changed since they first took it out. These cases often involved private medical insurance policies, where cover for different conditions can change from year to year.

Other complaints arose because policies hadn’t kept pace with the increased costs of medical fees - and the limits in the policy had restricted a consumer’s access to medical care.

Claims involving mental health issues still make up a significant part of the medical insurance cases we see. We recognise that it can be difficult in these cases for consumers to supply the kind of evidence that some insurers want to see.

Guidance from the National Institute for Health and Care Excellence (NICE) says that most patients’ treatment can be managed by their own GP. But this isn’t always recognised or reflected in the way that insurers handle claims involving mental health. There’s more information elsewhere in this annual review about the work we do to help vulnerable consumers - and to make sure we handle their cases sensitively.

what the complaints were about: banking and credit

Of the complaints we received during 2013/2014, 65,077 involved banking and credit - 13% of our total workload.

This table shows how these complaints were spread across different products and services.

type of complaint %
current accounts 30.5
mortgages 19.5
credit cards 16
consumer-credit products and services (eg point-of-sale loans, hire purchase and catalogue shopping) 12
unsecured loans 10
savings accounts 5.5
secured loans 1.5
other banking services 5

current account complaints

year ended 31 March number of complaints
2014 19,878
2013 19,560
2012 14,595
2011 19,944
2010 25,252

Many of the current account complaints we saw during the year involved consumers who told us that they were in financial difficulty - but that their account provider hadn’t treated them fairly.
Where a consumer is already in genuine financial difficulty, businesses are expected to treat them positively and sympathetically. What that means in practical terms will depend on the particular circumstances of the case. But it could mean refunding or stopping interest and charges, agreeing payment breaks or repayment plans, restructuring debt - or a combination of these things.

Similarly, where a consumer is on the verge of falling into financial difficulty, we also look to see how sympathetic and positive the business has been towards them. Disappointingly, some businesses appear to take the view that this duty doesn’t start until a consumer is actually “in default”.

To decide whether an account provider has treated a customer fairly, we look at whether they have considered the consumer’s overall position. For example, if the consumer has an overdraft, a loan and a credit card from the same provider, we would expect the provider to have taken all of these into account in any proposal they had made to the consumer.

Cases involving financial difficulty often require a mediated settlement. This relies on both sides communicating openly and honestly - and working constructively with us and with each other.

We continued to see a significant increase in the number of complaints about “packaged” bank accounts - with 5,668 cases referred to us during the year. These accounts usually charge a consumer a regular fee in return for a range of insurance products and non-insurance benefits - for example, mobile phone insurance, car breakdown cover or preferential borrowing rates.

“Packaged” accounts can be a good option for some consumers, saving them time and money - as long as they know what the benefits are, whether they can use them and what they have to pay for them.

But from the cases we see, we know that these accounts aren’t right for everyone. We continued to see complaints from consumers who felt that they’d been sold a “packaged” account that didn’t meet their needs - or that they hadn’t been given enough information about.

We also saw a growing number of complaints from consumers who said that their accounts had been “upgraded” without their knowledge - or who said they were told they had to have a fee-paying account. For these reasons we continue to find in the consumer’s favour in a high proportion of these cases.

However, over the course of the year we have seen an encouraging improvement in the way some banks investigate and deal with these complaints. By looking at our decisions and trying to align their approach to ours, they make it more likely that a complaint can be resolved without the need for our involvement.

Disputed transactions continue to account for a large proportion of the complaints that consumers refer to us - both in relation to credit cards and current accounts. The current account complaints continue to involve cash machine withdrawals, retail transactions made using a debit card, and payments made using online or phone banking. Although some current account providers are getting information to us faster, others are still confused about which rules are relevant - and how these rules apply in individual cases.

During the year we also received a significant number of complaints about scams involving current accounts. These fraudulent activities can be very sophisticated and are constantly evolving. Most recently we’ve seen cases involving “vishing” - where a fraudster phones a consumer and tricks them into handing over their security details or their card (sometimes both). Many of those consumers who did as they were asked - thinking they were dealing with their bank or the police - lost significant amounts of money.

While consumers clearly need to be alert to the possibility of fraud, we always consider what the account provider themselves could have done to protect their customer.

We regularly hear from consumers who have spotted a transaction on their account that they don’t recognise - and who think they may have been a victim of fraud. However, in these cases it often turns out that these payments have been made legitimately under a “continuous payment authority”. These are often used to pay for magazine subscriptions, club memberships, internet services or a short term loan.

During the year we continued to see complaints relating to technical failure - with IT glitches at banks temporarily preventing large numbers of people from accessing their money or using their cards.

In many of these cases, the problems that consumers had experienced were short-term and quickly put right. Typically, consumers hadn’t been able to withdraw cash for a few hours, or use their card when they were out shopping.

But in a smaller number of the cases we saw, there were more far-reaching consequences - especially where IT systems were unavailable for longer periods. In the most extreme cases, technical failures had led to delays in paying for medical treatment - or left people unable to pay funeral expenses.

The sheer number of consumers affected by these sorts of IT failures - and the immediacy of the problems they create - mean that banks can be inundated with complaints in a short space of time. This can make it difficult for them to give individual complaints the level of attention needed to put things right satisfactorily. To help them do this, we continued to build on the streamlined approach we had developed during the previous year in response to similar large-scale IT failures.

By working closely with the banks involved, and relying less on the requirement for written communication and paperwork, we can focus on putting things right for their customers as a priority.

complaints about mortgages

year ended 31 March number of complaints
2014 12,606
2013 11,920
2012 9,537
2011 7,067
2010 7,469

Following last year’s 25% increase, complaints about mortgages and second-charge loans remained at a high level during the year. It’s disappointing that we continue to receive so many complaints about straightforward administrative issues - as well as complaints where the lender hasn’t identified what the problem really is, or hasn’t taken the time to understand the impact the situation has had on their customer.

We again saw a small but steady number of complaints about interest-only mortgages. Most of these complaints came from consumers who were concerned that they’d been given inappropriate advice when they originally took out their interest-only mortgage.

Relatively few complaints came from consumers who had come to the end of their mortgage contract and couldn’t repay the capital. From what we have seen, many lenders seem to have been working constructively with customers who had found themselves in this position.

During the year we also received a significant number of complaints involving changes to the interest rates on standard variable-rate mortgages and tracker mortgages. These changes had affected both residential and buy-to-let customers. Although under the “jurisdiction” rules that apply to our service we’re not able to look at complaints about the sale of buy-to-let mortgages by intermediaries, we can consider complaints about buy-to-let when they involve lenders.

We continued to see a large number of mortgage-related complaints involving consumers who were experiencing financial difficulty - but we saw no increase during the year in disputes involving repossession.

With interest rates forecast to rise in the future, it is likely that more people may find themselves struggling - and at that point we may see more mortgage complaints involving hardship.

However, we are increasingly finding that the consumers involved have left it to a very late stage before seeking help for their financial difficulties. And because we can’t reverse a repossession, we are limited in how we can put things right for the consumer - even if we agree the business hasn’t treated them fairly.

This reluctance to admit to being in financial hardship is a trend we’ve noticed across all socio-economic groups. We are mindful - and encourage businesses to recognise - that a complaint about an apparently less urgent issue like an interest rate rise could indicate that a consumer is in real difficulty. This year, we continued to work with debt organisations - such as Stepchange and National Debtline - to raise consumers’ awareness of how we could help them.

During the year we have received fewer complaints about “porting” (transferring a mortgage to another property). We have also seen fewer complaints about the decision by a lender whether or not to offer a mortgage.

However, we have seen a small but worrying number of cases involving the decisions that lenders have made - for example, to “call in” borrowing or not to vary the terms of lending. In some cases these decisions hadn’t been made legitimately - and they had serious consequences for the lives and livelihoods of their customers.

credit card complaints

year ended 31 March number of complaints
2014 10,472
2013 19,634
2012 19,183
2011 17,466
2010 18,396
2009 18,590
2008 14,123

As in previous years, we received a significant number of complaints involving section 75 of the Consumer Credit Act 1974. Under section 75, if the supplier of goods or services has misrepresented them - or breached the contract - the credit card provider shares equal responsibility with the supplier.

The complaints we saw during the year reflected the wide range of purchases that people make using credit cards - from large ones like solar panels, timeshares and holiday clubs, to smaller ones like concert tickets and household appliances.

During the year we saw complaints involving all kinds of purchases - including energy-saving products like solar panels and alternative heat-source appliances.

We continue to see section 75 complaints where the card provider hadn’t considered the consumer's complaint properly - or hadn’t fully understood the extent of their obligations under section 75. This often led to unnecessary delays and inconvenience for their customer.

During the year we received fewer complaints about “default charges” on credit cards. These include charges that businesses may add to an account if the consumer goes over their credit limit, makes a late payment or misses a payment.

We also saw a significant fall in the number of complaints involving credit card charges brought by claims managers. This may reflect the work that a number of card providers have done to be clearer about the way they calculate and apply their charges.

However, we continued to see a substantial number of complaints involving disputed credit card transactions. These complaints can often involve significant sums of money - and it can take extensive work to establish what actually happened where the evidence is not always clear.

To help us deal with complaints about disputed transactions more quickly, we have encouraged some credit card providers to improve their processes - so we can get information from them much more efficiently. This helps us resolve these complaints at a much earlier stage.

But we still see too many cases where a credit card provider doesn’t seem to have understood that different rules apply where unauthorised transactions are made using credit cards rather than debit cards. And different rules again apply where a credit card account is used - but not the card itself. This is why we continue to work closely with card providers to make sure the rules are fully understood and properly applied.

complaints about consumer credit

year ended 31 March number of complaints
2014 7,630
2013 8,470
2012 7,416
2011 7,250
2010 6,329

Since April 2007 we have covered a range of credit-related complaints - including consumer credit provided by all types of lenders, as well as other regulated consumer-credit activities such as hire purchase and catalogue shopping. From April 2014 responsibility for regulating consumer credit was transferred from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA).

During the year we received 46% more complaints involving payday lending than in the previous year. We continued to hear from many consumers that the short-term loans they had been offered were unaffordable. And in many cases, we found that the lender hadn’t taken adequate steps to assess the consumer's financial position when the loan was taken out. In particular, we saw cases where the lender clearly did not have an adequate credit-scoring process in place.

Consumers also referred complaints to us where their difficulties had been caused by the payday lender’s use of “continuous payment authorities”. In some of these cases the lender’s repeated attempts to take payments meant the consumer faced a spiral of further charges - and was left without enough money to live on.

During the year we have seen cases involving payday lenders offering “running account” credit (as opposed to “fixed” credit). In these cases the lender had quoted a minimum payment that would only cover the interest accruing on the loan - meaning that the consumer wouldn’t repay any of the capital if they only made the minimum payment.

In other cases - even where the minimum payment did cover both interest and capital - we found that some lenders hadn’t made consumers aware of the consequences of paying only the minimum amount (as they are required to do by the regulator). In some of these cases the documentation was poor - and didn’t clearly set out the total cost of borrowing to the consumer. 

We also continued to receive complaints about debt collecting - although the number of these cases fell by a third during the year. In some of these cases we were concerned about the approach taken by the debt collector - and decided that the way in which the debt had been pursued amounted to harassment. We also saw a number of complaints involving debt collectors chasing the wrong person for the debt.

Consumers referred a significant number of complaints to us about loans they had taken out to buy new and used vehicles. In most of these cases, the consumer felt that the vehicle had been defective in some way and they had approached the lender to put things right under section 75.

As we have highlighted in previous annual reviews, when we look into these types of complaint, we often find motor credit providers reluctant to accept any liability. During the year some credit providers still tried to insist that the consumer had to sort things out themselves directly with the garage.

In some cases, for example, the lender had initially refused to consider the consumer's complaint, saying that the consumer should make a claim under the car warranty rather than against them.

In those cases, we reminded the providers about their responsibilities under the law - and explained that the existence of a warranty did not affect the consumer's statutory rights.

In complaints involving debt management, we continued to see cases where debt managers had failed to give consumers clear information about the fees and charges they had applied. In particular, we came across situations where the consumer hadn’t been told that initial payments wouldn’t be used to reduce their debt - but would instead go towards the debt manager’s own fees and charges.

In other cases, we discovered that the debt manager hadn’t passed on the consumer’s payments to the people they owed money to. Where we saw this happen, we informed the regulator.

complaints about unsecured loans

year ended 31 March number of complaints
2014 6,310
2013 7,809
2012 6,262
2011 5,820
2010 6,285

We continued to see significant numbers of complaints from borrowers - both individuals and small businesses - who were having difficulty making loan repayments. Lenders in these cases generally seemed to be aware of their obligations to treat these people positively and sympathetically.

However, what amounts to “positive and sympathetic” treatment will vary from case to case - so lenders need to be flexible and pragmatic. A standardised approach - with a rigid process and limited options - is unlikely to achieve a satisfactory outcome.

In these cases we look at the extent to which the lender involved their customer in discussions at an early stage - providing an opportunity to talk honestly and constructively about the possible ways forward.

We also continued to see complaints relating to “personal guarantees” on borrowing. In some of these cases, the person bringing the complaint had guaranteed a loan taken out by a family member. We had to remind lenders in a number of cases that they need to ensure guarantors fully understand the nature of the commitment they’re taking on.

In other cases, individuals had acted as guarantor for borrowing taken out by the small company they ran. These loans were often covered by the Enterprise Finance Guarantee scheme. Many guarantors were evidently unclear about the detail of this scheme - and we decided that some lenders should have explained far more clearly how the scheme operates.

Interest-rate hedging products continued to feature in a small number of the complaints we received during the year. The cases often involved large amounts of money - and were usually very complex. As well as cases where hedging products were sold alongside a loan, we also saw cases where a form of hedging was “embedded” within the loan.

These complaints were usually referred to us by small businesses, who told us that the products they had been sold were unsuitable for their circumstances - and that they hadn’t been made aware of the potentially very high costs of ending the arrangements early. In investigating these cases, we often found that the bank involved hadn’t given the small business enough information to make an informed choice about taking out the product.

Our aim in these cases is to put the small business - as far as possible - in the position they would be in if they had been given sufficient information at the outset. Sometimes we may decide that the business wouldn’t have taken out a hedging product at all. In other cases we decide that they would have taken out a hedging product - but of a different type or for a shorter term.

These cases involve complex situations and entrenched positions - often made worse by the bank taking an overly-legalistic approach. This is why a disproportionately high number of these disputes could only be settled by an ombudsman making a final decision.

complaints about savings accounts

year ended 31 March number of complaints
2014 3,611
2013 4,967
2012 4,286
2011 4,783
2010 5,033

During the year, interest rates on savings accounts have remained at historically low levels. Because of this, many providers have continued to offer accounts with promotional interest rates that apply only for a limited period. The details of these accounts are not always as straightforward as they seem - and in many of the complaints we decided that the account provider hadn’t explained things clearly enough to their customer.

We continued to see a small number of complaints from consumers who felt they should have been personally notified when the interest rates on their savings accounts were reduced. We upheld a significant proportion of these cases.

In some of these cases we found that account providers hadn’t acted in line with the relevant regulations. These regulations say that an account provider needs to decide whether a change in interest rates is “material” - and if it is, they need to notify their customer personally. To decide whether the change is “material”, account providers should consider both the balance of the account and the size of the rate change.

Some account providers who hadn’t done this argued that they had acted in line with “industry guidance”. But we said that they should have acted in line with the regulations.

complaints about other banking services

year ended 31 March number of complaints
2014 3,517
2013 3,838
2012 2,955
2011 2,733
2010 2,987

During the year we continued to see complaints about “e-money” - usually involving pre-paid accounts that consumers had used online. Most of these disputes had arisen because of administrative errors. Other complaints related to terms and conditions - for example, terms that had allowed the provider to freeze the consumer’s e-money account.

Consumers also complained to us that they’d withdrawn money overseas from their pre-paid account - and felt that their account provider hadn’t told them that a fee would apply. Other consumers were unhappy that the exchange rate that had applied to the currency they withdrew overseas was less advantageous than the rate that had applied when the money was loaded into their account.

Many of the consumers who complained about these issues had thought their account offered them the same protection as a bank account or a credit card. But this isn’t the case. Many protective features don’t apply to these accounts - and different e-money providers have different terms and conditions.

Complaints about the"faster payments service” continued to feature in our work during the year. These payments are almost instant and there are limited things that can be done to put a mistake right. This led to a number of disputes being referred to us where consumers had made a mistake with the relevant account number or sort code details - and money had been sent to the wrong account.

When payments are made online, they are allocated to an account using only the sort code and the account number that the consumer provides. There is no check against an account name.

This means that if, for example, a consumer makes a mistake typing in an account number - and there is, coincidentally, an account with that number at the same branch - then the money will go into the wrong person’s account.

The UK Payments Council’s guidance says that when consumers make a payment they should be shown a short, prominent warning that only the account number and sort code - and not the account name - will be used to process the payment, and that a mistake could lead to delay or loss. We regard this approach as good industry practice - and we take it into account when we decide the outcome of these cases.

We have also continued to see disputes during the year about powers of attorney. Typically the complaints involved problems that arose when someone who had been given power of attorney by the account holder had tried to register it with the bank. Other consumers complained to us about problems they had faced when they later tried to access the account - or obtain information - under the power of attorney.

We continued to see examples of bank branch staff who had dealt nervously with someone who held power of attorney for their customer - and who could have benefited from more in-depth knowledge about powers of attorney.

In some cases we found that bank staff had assumed - wrongly - that granting or registering a power of attorney can be effective only if the “donor” (the consumer who has given someone else power of attorney for them) no longer has mental capacity to deal with their own affairs.

As in previous years, we also saw a number of complaints involving stolen or counterfeit cheques. In some cases consumers were given these cheques in payment for goods they had sold through classified adverts. In other cases consumers told us that the cheques had been deposited in their accounts - and the money later withdrawn - without their knowledge or consent.

These cases are often complex - and we sometimes need to obtain information about the accounts of third parties that appear to be connected to the transaction.

Consumers also referred complaints to us during the year about cheques that had been intercepted by fraudsters and paid into accounts with other banks. We are usually able to deal with complaints about this type of problem - even if the consumer was not a customer of the bank into which the fraudster had paid the cheque.

what the complaints were about: investments and pensions

During the year we received 15,938 complaints about investments and pensions. This represented 3% of the total number of new cases we received during the year - a similar proportion to the previous year.

This table shows how investment and pension-related complaints spread across different products and services.

type of complaint %
mortgage endowments 22.5
whole-of-life policies and savings endowments 15.5
personal pension plans 11
portfolio management 7.5
small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 6.5
investment ISAs 6
stockbroking 6
unit-linked bonds 5
annuities 4
SERPs 3.5
guaranteed-income bonds 2.5
derivatives
(including interest-rate hedging products and spread betting)
2
"with-profits" bonds 2
other (including unit trusts, "structured" investments and income drawdown) 6
complaints about mortgage endowments %
2014 5,400
2013 3,048
2012 3,267
2011 4,657
2010 3,573

In last year’s annual review we reported that the number of complaints we received about mortgage endowments had increased by a substantial 43%. This year complaints fell by 23% - but the number still exceeded the level of new cases in 2011/2012.

At the peak of complaints about mortgage endowments in 2005, we were receiving up to 1,500 cases a week. This followed major publicity campaigns to make consumers aware that their endowment policy might not perform well enough to pay off their mortgage. In 2005 these complaints represented 63% of our total workload. In 2013/2014 that figure was just 0.7%.

For many people referring complaints to us over the last few years, the practical difficulties caused by mortgage "shortfalls" only started to bite as endowment policies they had taken out in the late 1980s - to repay 25-year mortgages - began to mature, usually with disappointing returns.

We can’t look at the majority of complaints like this because the then regulator - the Financial Services Authority - set time limits on complaining during the 2000s. This prompted many consumers to take action over any potential shortfall they’d encounter when their policies matured. Those people who took action - and whose policies had been mis-sold to them - received compensation.

Those people who didn’t act are now finding that it’s too late for them to complain about the sale of their policy. We can intervene only if there is no evidence that the consumer was ever told about the time limit. However, in most cases businesses can show us that that they wrote to customers about the time limits.

complaints about whole-of-life and term assurance

During the year we received significantly fewer complaints about whole-of-life policies. This may be because of the work we have done with claims managers - encouraging them to establish more precisely the grounds on which a complaint might be referred to us on behalf of a consumer. And as a result of this we have had far fewer cases referred to us that have very little chance of being upheld.

Most of the complaints we received involved “reviewable” whole-of-life policies - where the business carries out a review of the policy some years after the consumer took it out. If the review shows that the business’s original assumptions - particularly in relation to investment returns - haven’t been met, they can reduce the consumer’s cover or say that the premiums need to increase.

Where we are satisfied that the consumer hadn’t been adequately warned that a review might lead to these kinds of changes, we generally uphold the complaint.

We continued to see relatively high levels of complaints about term assurance during the year. This may reflect the fact that people continue to confuse term assurance with PPI - and we find that similar arguments are used in complaints about these types of product.

complaints about pensions

year ended 31 March number of complaints
2014 4,361
2013 4,401
2012 3,454
2011 2,706
2010 3,594

We received slightly fewer complaints about pensions during the year - 4,361 cases compared with 4,401 in the previous year. Some pension-related complaints involve large amounts of money. Although we can now tell a business to pay a maximum of £150,000 to an individual consumer - for new complaints we received after 1 January 2012 - we have seen complaints that involve significantly more money than this.

In last year’s annual review we reported that a financial business was seeking clarification from the Court of Appeal on whether a consumer who has accepted an ombudsman’s decision can then go on to pursue the business for further compensation. In February 2014 the Court of Appeal ruled on this matter - and it is now very unlikely that a consumer can do so.

However, not all pension complaints involve large sums of money. We also see complaints from consumers whose pensions are much smaller - and the issues are just as concerning for the people involved. Whatever the sum of money at stake, most people rely on their pension to meet their needs when they retire.

So it’s not surprising that some may be more inclined to pursue a complaint as far as they can, if something goes wrong. These complaints can be among the most legalistic and hard-fought that we see.

During the year 601 complaints involved annuities - the regular annual income a consumer receives as a pension when they retire. Because life expectancy has improved significantly - and interest rates have been consistently low in recent years - many consumers referring complaints to us are unhappy to find that they’re being offered a much smaller annuity than they’d expected.

A consumer’s decision to take an annuity is crucial - not least because they can’t change their mind about it later on. Yet we do find that many consumers take a pension from their original provider without shopping around to see if they can get a better deal somewhere else.

Widespread concern about these kinds of issues is now being addressed by the government following announcements in the March 2014 Budget.

In the pension-related complaints referred to us, we look to see whether the business has provided consumers - whatever their circumstances - with clear information to make sure they understood the options open to them.

During the year we saw a significant increase in the number of complaints from consumers who had taken out self-invested personal pensions (SIPPS). Many of these complaints involved advice to invest in “unregulated collective investment schemes” (UCIS) within a SIPP.

These complaints usually came from consumers who had been looking for better returns than they could achieve through more conventional investments. But the consequences of investing in some of these higher-risk funds can be extremely serious. We find in the consumer’s favour in a relatively high proportion of these cases.

complaints about investment-linked products

year ended 31 March number of complaints
2014 3,104
2013 4,697
2012 3,308
2011 3,784
2010 6,329

year ended 31 March

When markets are relatively buoyant, we tend to receive fewer complaints about what might be called “conventional” investments - and this was the case during the year.

However, we saw significantly more complaints involving “unregulated collective investment schemes” (UCIS) and similar higher-risk investments. This might be because, despite better performing markets generally, some of these funds have not done so well.

UCIS complaints often raise difficult jurisdictional questions about whether we can even look into them - particularly where the complaints involve complex relationships between businesses and their appointed representatives. In some cases we have seen, representatives appear to have acted outside the authority given to them by the business - which has left consumers unprotected. The consequences of an inappropriate investment in an “exotic” fund can be serious. We have seen cases where consumers have lost all the money they invested.

The disputes we see in this area are often complex and hard-fought. We often find that the businesses involved employ lawyers to argue their case tenaciously on their behalf. Some of these businesses appear not to have understood that the ombudsman isn’t the same as a court - and that although we must take the law into account, our decisions are based on what we believe is fair and reasonable in the individual circumstances of each case.

The “suitability” of investments remained the main cause of the problems we saw across all complaints in this area - including disputes involving UCIS. With interest rates still at a historic low, we saw complaints from consumers who had sought better returns. But this had exposed them to riskier investments than they really wanted - with more money at stake than they could afford to lose.

During the year we’ve also seen a disappointing number of cases involving straightforward matters like administrative errors and delays. We have also started to see a small number of complaints about fees, charges and “ongoing commission”, following the increased transparency of these arrangements as a result of the regulator’s “Retail Distribution Review” (RDR).

complaints about stockbroking and portfolio management

year ended 31 March number of complaints
2014 2,079
2013 2,428
2012 1,842
2011 2,267
2010 2,474

year ended 31 March

In last year’s annual review we reported that complaints about stockbroking and portfolio management had gone up by a third. Over the last year, the volume of these complaints has declined - largely because of buoyant stock market conditions.

However, it is disappointing that we continued to see a number of complaints about administrative matters, delays and mistakes in calculations - as well as complaints about increases in dealing charges. Our long-standing approach to resolving these sorts of problems is published in the online technical resource on our website, which we encourage businesses to refer to and learn from.

During the year we saw a marked increase in investment-related complaints involving film partnerships. A significant proportion of these cases were referred to us on behalf of consumers by law firms or claims managers. The increase may reflect the fact that certain tax benefits associated with film partnerships have been reduced or removed. This may have led some consumers to question the appropriateness of their investment.

We also saw a slight increase in investment-related complaints involving carbon trading and enterprise zone schemes.