Furious consumers are hitting back at the beleaguered financial-services industry by making record numbers of complaints about everything from bank accounts and store cards to insurance policies and self-invested personal pensions.
The Financial Ombudsman Service (FOS), which has the power to resolve such disputes, is receiving more than a quarter of a million new cases every year, which is double the amount that it was dealing with just three years ago.
And even though the figures have been inflated by the incredible number of gripes surrounding payment protection insurance (PPI), the trend is likely to continue, with people being increasingly prepared to take on the high-street giants.
Natalie Ceeney, the Chief Ombudsman, says trust in financial businesses has eroded over the last few years due to the widespread mis-selling of products such as PPI. This has made consumers less willing to accept poor service and more empowered to say when they're unhappy.
"We have seen a general increase in complaints across all areas of money and finance, from pensions to payday loans," she explains. "A lot of this results from more confident consumers who are increasingly aware of their rights."
The FOS received a staggering 264,375 new cases in the year ending 31 March 2012 – more than double the 127,471 it dealt with just three years ago – and Ms Ceeney believes this is partly to do with the fact that companies are choosing to fight whereas they used to settle at an earlier stage.
"This has led to more entrenched disputes requiring the ombudsman to step in and help resolve things," says Ms Ceeney. "The best businesses don't mind you complaining as they see it as an opportunity to help them improve their service for all customers."
Justin Modray, founder of the website Candid Money, believes it is important for consumers to pursue cases when they feel they have been mis-sold a financial product or left disappointed by either the way it has performed or in their dealings with the provider.
"Financial services companies only tend to pull up their socks when forced, so the more customers that complain about bad advice, products and service the better," he says. "Left unchallenged, offending companies will continue to take customers for a ride and pocket fat profits along the way."
Jason Witcombe of Evolve Financial Planning agrees that companies need to take action, but is also concerned about the prospect of a personal injury claims culture being cultivated within financial services, encouraged by specialist claims firms seeking to boost their own profits. "Consumers are very well protected, but need to be more inquisitive," he says. "Lots of the complaint stories we read about involve products that looked too good to be true. If anything offers high returns with apparent low risk or volatility, you have to question its authenticity."
The most complained-about financial products
So let's take a closer look at the financial products that have been causing the most problems. Why are they generating so many complaints?
Payment protection insurance
The number one – by a long way – is payment protection insurance. There were a staggering 145,546 complaints about how these policies were sold made to the FOS between October and December last year – more than double the 66,882 figure during the previous quarter.
This is the continuation of a trend over the past five years. The FOS is currently receiving around 2,000 new cases every working day, and when you bear in mind that an estimated £50bn-worth of policies were sold over the last 15 years the scale of the job is clear.
Many people have already received compensation. Official figures reveal that £439m was paid out in January 2013, which pushes the total amount of compensation agreed since January 2011 to £8.9bn. This figure is expected to continue rising sharply.
A lot of complaints received about credit cards centre on the interpretation of Section 75 of the Consumer Credit Act, under which the credit-card company is jointly liable if something goes wrong with a product or a service paid for by credit card.
Not only are many consumers unclear about the level of protection it provides, but many credit-card providers struggle with understanding this law, according to the FOS, and sometimes raise "poorly constructed legal arguments" as to why it does not apply.
Other problems encountered include disputed credit-card transactions, default charges levelled at consumers, and issues arising at the end of special credit-card deals where the provider has applied the terms of the deal with little in the way of flexibility.
This has become a significant area for complaints over the last few years, especially in relation to the so-called packaged accounts, whereby consumers get access to features such as insurance and breakdown cover in exchange for paying a monthly fee.
Issues have also arisen over the joint debts of couples that have broken up, such as an overdraft on a joint account that is either incurred or significantly increased by one of the partners after they have gone their separate ways.
This is another area that has witnessed a sharp increase in the number of complaints over the past couple of years, many of which reflect problems affecting both the mortgage market and the economy as a whole.
Top of the list of gripes come administrative errors, while the FOS is also being asked to investigate how lenders handle arrears, including the levelling of charges and apparent inflexibility in finding a solution that is a comfortable fit with the personal circumstances of the consumer.
The companies at the centre of most complaints
Analysis of data for the second half of 2012 reveal that banks are at the centre of the majority of complaints that get referred to theFOS. Top of the list is Lloyds, featured in 45,727 new cases, followed by Barclays on 44,725 and Bank of Scotland with 39,375. MBNA, HSBC and Capital One (Europe) all received more than 10,000.
So what is likely to cause problems in the future? Geoff Penrice, a chartered financial planner at Astute Financial Management, suggests structured products, which appear to offer investors the best of both worlds: market returns but without the investment risk.
"The simplistic claim of a 'guarantee' can make it seem appealing for the client and an easy sale for the adviser," he says. "However, the devil is in the detail, and it is often the case that neither the client nor adviser fully understands how the product works, or the true risk involved.
"This combination can be a recipe for disgruntled clients and lead to complaints."
Mr Modray agrees. "Structured products are not bad investments but some customers may have been sold these investments with little regard for risk and suitability, such as by banks and building societies as a savings account alternative."
He also predicts that execution-only discount brokers providing fund "recommendations" via best-buy lists may come under scrutiny as customers could argue that this is tantamount to advice. He suggests that greater controls need to be exercised over price-comparison websites.
"They should be compelled to disclose commissions they receive from insurers and other providers in the interests of transparency," he adds.
STEP BY STEP: HOW TO COMPLAIN
Complain to the business
The first step is to make your complaint to the business with which you're unhappy in order to give them a chance to look into the problem. Try first to contact the person you originally dealt with. If they can't help, say you want to take matters further. Ask for details of the official-complaints procedure and the name of the person who will be handling your complaint. The FOS is happy to contact them on your behalf outlining the complaint. Ring the consumer helpline (0800 023 4567) or send an email to firstname.lastname@example.org
Put it in writing
Write "Complaint" at the top of your letter and make sure you include vital details such as your policy or account number. Keep your letter brief and to the point, setting out the facts in a clear and logical way to avoid any confusion. If you end up speaking to anyone over the phone ask for their full name and job title – not just "Tony" – as well as a note of the date, time and what was discussed. Send copies of any relevant paperwork that you believe backs up your case.
Get an ombudsman on the case
By law a financial company has eight weeks to resolve problems before the FOS can get involved. If you're not satisfied then ask it to investigate. To start this process fill in a complaint form. This can be downloaded fromwww.financial-ombudsman.org.uk. Or you can ring the helpline for guidance.Reuse content