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ombudsman news

issue 68

March / April 2008

ombudsman focus: consumer credit complaints and the ombudsman service

It's now nearly a year since the Financial Ombudsman Service has been able to look at complaints involving the wide range of businesses that hold a standard consumer credit licence.

We ask lead ombudsman, Jane Hingston, to tell us about the types of consumer credit dispute that are now being referred to the ombudsman service - and how the businesses concerned can help ensure these disputes are settled as quickly and effectively as possible.

has the number of consumer credit complaints referred to the ombudsman service over the past year matched up with predictions-

The numbers reaching us have been pretty much as we expected - around 2,000 consumer credit complaints in the first year - although it was quite difficult at the start to predict just how many complaints we were likely to see. That's because there had not formerly been any requirement for consumer credit businesses to keep records of complaint numbers.

Our remit over businesses with a standard consumer credit licence only covers complaints about things that happened after 5 April 2007. Quite a large proportion of the enquiries we received at first concerned events that took place before that date, so they were not matters that we could help with. That is less of a problem now, and we expect numbers to build steadily as we go forward.

Most of the initial complaints and enquiries we receive about businesses with a standard consumer credit licence do not go on to become "full-blown" disputes. In part this is because the front-line staff in our customer contact division can resolve many of the more straightforward problems there and then.

But we get too many calls from customers who are unsure how to approach the business itself with their complaint. We can - and do - direct these customers to the right place. However, this suggests that some businesses should be doing more to highlight their own complaints process to their customers.

what are the most common areas of complaints involving consumer credit - and are you seeing any particular themes or trends coming through-

The three main categories of complaint we deal with involving businesses with a consumer credit licence are hire purchase, debt collection and store cards - and this has been the case pretty much since our consumer credit remit started.

It is difficult to identify any strong trends at this stage. As to themes, it is fair to say that many of the complaints seem to concern administrative muddles, service failures and poor communication.

has anything in particular surprised you in the first year of looking at these disputes-

No "surprises", as such - but it has been encouraging to see how quickly many businesses with consumer credit licences have adapted to our role - and how willing they have been to participate in arriving at informal complaint settlements.

Unfortunately, though, there is a very wide gulf between the approach of these smarter businesses and that of some of the less constructive businesses we deal with.

are you seeing more complaints as a result of the recent "credit crunch"-

It would be short-sighted not to expect that the wider economic climate, including the so-called "credit crunch", will affect the number and types of consumer credit complaints we receive. Already, we have been seeing an increase in complaints about changes to credit card and overdraft facilities. I expect that to continue. Consumers are also increasingly challenging the fairness of charges that are being added to their accounts.

Trade associations and consumer advisers are very well-placed to spot emerging issues in the credit area, so the ongoing work we do with them is particularly valuable in these interesting times.

are any particularly difficult or challenging issues emerging-

I know that many consumer credit businesses are worried about the new rules that come into force later this year, under the Consumer Credit Act 2006, relating to the provision of post-contractual information (including information sheets).

I have always felt, though, that the transparency gained through these measures can be made to work in everyone's favour. Consumers will be kept up-to-date on exactly what they owe, so there will be no nasty surprises. They will be given information about where they can get debt advice, and help with disputes, at the times they need it.

In view of the number of disputes we see that appear to stem from lack of basic information - and that then became worse because the consumer did not know who to go to for free help - I am hopeful that the new rules will prove beneficial all round.

what help is available for consumer credit businesses who receive their first complaint- Many will have had no dealings with the ombudsman service before.

We provide a range of services to help businesses that have received a complaint and need some guidance through the complaints-handling and ombudsman process. Our technical advice desk (020 7964 1400) is on hand from Monday to Friday to provide informal guidance on our jurisdiction, the complaints process and our own procedures. This service is also available to consumer advisers.

There's a special online resource for consumer credit businesses.

We also go out and about to talk to the consumer credit sector. In the last year, I have spoken to delegates at the Credit Show 2007, the CCR-interactive Conference, events organised by the Consumer Credit Trade Association, the Money Advice Liaison Group, the Credit Services Association, the Civil Court Users Association - I could go on!

any thoughts on what the future holds for consumer credit businesses-

Well it's certainly not going to be boring! Alongside getting to grips with the Consumer Credit Act transparency requirements and the wider supervisory role of the Office of Fair Trading, consumer credit businesses will also, among other things, have to adapt to the changes coming on the heels of the European Consumer Credit Directive. And then there are the challenges of the wider credit climate and concerns regarding levels of personal debt.

But, in terms of dispute-resolution at least, I hope businesses will feel they are now on fairly familiar territory!

and finally - are there any tips for dealing effectively with ombudsman complaints that you could share with consumer credit businesses-

I know that many consumer credit businesses are small or medium-sized firms with limited complaints-handling resources. This can create challenges. But taking advantage of our online resources and of the following tips should ensure that - whatever its size - a business gets it right.

helping you to help us - answering questions from the ombudsman service

  • Above all, remember that the ombudsman service is impartial. We are on nobody's "side". There is no need to be defensive when you communicate with us, and an emotional response will not help. A professional response is the appropriate one, though there is no need to make formal representations, as you would need to do in court proceedings.
  • Our questions are designed to find out what actually happened - not to trick you. You should answer them as best you can.
  • If an adjudicator telephones you to discuss a case, this will usually be to check a small point quickly or to establish if it might be possible to resolve the dispute informally. Our adjudicator will probably have had a similar discussion with the consumer.
  • Always provide the information that the adjudicator has asked for, rather than what you hoped they would ask for. Otherwise, we will have to contact you again - which delays matters as well as wasting your time and ours.
  • If you have other relevant information or evidence that you believe the adjudicator needs to see, then provide that as well - and explain why you have done so. If you are unsure, you can always telephone the adjudicator to check first. But please don't just send us large bundles of unsorted paperwork - more is not always better!
  • Never ignore a question that you cannot (or would rather not) answer - and don't be tempted to try an ambiguous reply. The adjudicator will notice and will follow it up.
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