The publication of the Financial Ombudsman Service's annual report this week may have signalled the start of a new phase for the complaints-handling body. Not only is it predicting a dip in the PPI (payment protection insurance) complaints that have dominated its caseload in recent years, but it also expects to play a greater role in dealing with gripes and the kind of administrative friction that can ruin a consumer's day but does not quite qualify as a fully fledged complaint.
Later this year the organisation will choose its next chief ombudsman to replace Natalie Ceeney, who stood down in November and who developed much of the thinking behind the body's new direction. She believed that consumers were becoming so much more experienced in complaining that a shift was taking place in the power balance with financial institutions. For his part, the interim chief ombudsman, Tony Boorman, declares himself "genuinely hopeful" that the industry has taken on board the "difficult and expensive mistakes" of widespread mis-selling of PPI and other financial products.
The 2013-14 annual report, published on Tuesday, shows that just under 400,000 new cases of PPI mis-selling were taken on by the Ombudsman over the year, representing 78 per cent of all new cases. But Mr Boorman says the monthly PPI totals for new cases have been falling since last summer – a trend that he expects to continue. "Next year we hope we will see a significant decline," he says, predicting a halving of the number to about 200,000 in 2014-15.
A fall-off in its main source of complaints could mean that the Ombudsman has more time to plan its development rather than firefighting. One way that it might go is to try to use the huge amounts of industry feedback it receives to help the institutions improve the experience of customers, instead of concentrating so much of its might on formal interventions when relationships have broken down. Ms Ceeney laid the basis for this approach when she said: "The notion of a 'complaint' is increasingly outmoded. Most people don't relate to it. Instead, people say: 'I'm annoyed with my bank.' It's about dissatisfaction."
Mr Boorman gives an example of the kind of issue his predecessor could have been describing: "a 90-year- old who is told to upload a copy of their passport" by a bank. While some 90-year-olds would have no problem fulfilling that request if they were opening a new account with a bank, many would struggle – and some might worry so much that it would ruin their day, or even their week. But it would be hard to frame a formal complaint about this requirement – not least because the customer has suffered no monetary loss and also because the bank has a duty to have tight security.
It is in this kind of case that the Ombudsman can intervene usefully. "We can often put the frustration that a customer feels into words a bank understands," says Mr Boorman. "We will write to a bank and simply ask it to look at an issue like this. It's often easy to get an issue resolved this way."
While the experience of widespread mis-selling of PPI has been painful for consumers and banks, both sides have been able to learn from it. PPI and the other huge scandals of bank charges, consumer credit and payday loans have helped educate the public about their rights.
"Historically, complaining was an intellectual, middle- class sport," says Mr Boorman, pointing to stats from five years ago showing that half the complainants to the Ombudsman were in the A and B (upper middle and middle) classes. Nowadays, these account for just a third, with the C1s, C2s, Ds and Es (covering lower middle class down to subsistence level) making up the majority. "That's a really positive sign," he says.
Heading an organisation that received 2.4 million enquiries from consumers in 2013-14, of which 512,000 turned into formal complaint cases, Mr Boorman cannot say the behaviour of banks and other institutions has generally improved.
For instance, there are several areas where complaints have increased to a worrying degree. The number about packaged bank accounts rose 248 per cent in 2013-14 to 5,668. Mortgage complaints rose 6 per cent to 12,606. And the Ombudsman also found in favour of the consumer in 58 per cent of the cases it decided during the year – suggesting that a rather poor approach to complaints lingers on in many institutions. So the acting chief ombudsman limits himself to saying that "the jury is out" on "whether the industry has weaned itself off a retail banking environment which too often relied on misleading customers into taking out premium-priced products they didn't really need".
There is evidence that some institutions and some product areas now have rather better practices. For example, complaints went down on investment-linked products by 34 per cent (to 3,104); on savings accounts by 27 per cent (to 3,611); and on personal pensions by 21 per cent (to 1,748).
It could be argued, perhaps, that the interests of consumers and institutions will need to converge and the industry will find benefits in serving its clients better. This would be because product innovation is potentially dangerous for both sides as neither is familiar enough with the product to know what the flaws are. So the consumer can end up with a poor product and the industry can end up with huge compensation bills – over £22bn so far in the case of PPI.
The obvious way to avoid such nasty surprises is for banks to get better at listening to feedback from customers and to act upon it. "This has got to be a sensible way for business to go," says Mr Boorman. "We all ignore that kind of information at our peril."
Dean Barker, a property manager from Cumbria, was driving his van when he was involved in an accident. A nasty position deteriorated when the policeman who arrived at the scene told Mr Barker that he was uninsured.
Used to getting reminder letters every year, he was unaware his policy had lapsed 14 days previously.
He also had two other insured vehicles at home. He told the officer he would have used one of them if he had known. Mr Barker realised, though, that he could lose his licence. Ultimately the police believed his story but he still had to deal with the financial consequences.
The cover had been arranged via a broker, which said it had sent out a reminder, though it had not chased things up when no renewal was arranged. Mr Barker complained to the broker and, when it held firm, he went to the Ombudsman. "They were very helpful and did not use words I did not understand."
The Ombudsman couldn't get the two sides to agree and later decided in favour of Mr Barker. The van had been written off and so the broker was ordered to give him the pre-accident value.
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