Ombudsman in demand as frustrated consumers refuse to back down
Public are quicker to take action to force retailers to play fair, says Neasa MacErlean.
Friday 31 May 2013
More confident consumers are pushing the enquiry rate up dramatically at the Financial Ombudsman Service. The resolution service, which is free to the public, saw its overall case load surge by 70 per cent from 1.3 million enquiries and complaints in the year to March 2012 to nearly 2.2 million in the year to March 2013.
While payment protection insurance (PPI) now accounts for 70 per cent of the Ombudsman's work, other areas are also growing fast. Mortgage enquiries are up 25 per cent, current accounts 34 per cent and pet insurance 50 per cent on last year.
Chief Ombudsman Natalie Ceeney believes the current level of consumer confidence is "irreversible":
"We've now got a much more vocal consumer out there. It's not a weird minority. This is what you do."
She cites the horsemeat scandal and the U-turn on HMV vouchers in January as examples of people power requiring retailers to treat their customer base well.
When music and DVD retailer HMV went into administration this year, the administrators at first said they would not honour vouchers bought beforehand. But public outrage then forced them to change their minds.
Similarly, Ms Ceeney thinks that public pressure encouraged food retailers to respond well in general over horsemeat, accepting their mistakes and promising better service.
Turning to banks – who are responsible for 45 million of the total 50 million PPI policies sold – the Chief Ombudsman finds a more negative approach.
She says: "A mind shift is needed in financial institutions. If banks are serious about rebuilding trust, we need to show consumers we are listening."
Banks are clearly underperforming some other sectors. On bank PPI cases decided by the Ombudsman, the customer wins in 70 per cent of cases — but that percentage falls to 21 per cent among building societies.
On non-PPI issues, customers win in 33 per cent of cases against banks – twice the level of the win rate, 17 per cent, against building societies. These statistics mean that banks have poorer complaints-handling systems.
The Ombudsman is encouraging all institutions to be more reasonable with customers. Two pilot schemes took place in the last year which the service wants other organisations to try. In one scheme, PayPal. while trialing a fast-track system with the Ombudsman, achieved an 80 per cent satisfaction rate with customers who had complained about it.
It did not pay out more money nor did it lose more cases in this trial, but it was resolving issues through the Ombudsman within a fortnight rather than the usual several months.
Normal satisfaction rates are about 50 per cent, says the Ombudsman. Its research suggests that, if a customer's complaint or problem is handled professionally and courteously, customer satisfaction can actually increase.
Many consumers are mainly seeking an apology when they complain. If they get one, they often feel very satisfied because they have been listened to and have achieved a just outcome.
A second pilot scheme, involving Royal Bank of Scotland compensating customers who were unable to access their accounts during an IT glitch last summer, saw many people compensated within days.
"Customers really appreciated the effort we put in," says Ms Ceeney.
Enquiries to the Ombudsman are likely to keep rising. So far only 10 per cent of PPI-holders have complained. "Will it go up to 20 or 50 per cent?" asks Ms Ceeney. "I really, really don't know. Is PPI going to rumble on for several years? Yes."
Some complaints experts believe PPI was such a flawed product that most people who had it could be due a refund. The banks have been pushing for a deadline to be set, stopping people from lodging complaints afterwards. But since many consumers are unaware that they ever bought PPI, regulators could provoke an outcry if they give in to industry requests on the issue.
Hardship is another cause for increasing complaints. A quarter of mortgage queries to the Ombudsman relate to it. These are the kind of cases where a discounted rate comes to an end for a mortgage borrower who is then pushed towards a much more expensive loan which he or she cannot afford. The Ombudsman is "often broking solutions" in these circumstances, says Ms Ceeney. "It may be that one side is not totally right and that the other side is not totally wrong."
This approach on mortgage cases illustrates a more positive tone from the Ombudsman. Rather than simply wishing to resolve technical complaints, the service is trying to encourage consumers and institutions to behave well and clearly towards each other.
"The notion of a 'complaint' is increasingly outmoded," says Ms Ceeney. "Most people don't relate to it. Instead, people say: 'I'm annoyed with my bank.' It's about dissatisfaction."
By comparison, people who think they probably unwittingly ate horsemeat a year ago could feel a sense of grievance but would find it difficult to produce the receipts and proof necessary to make a complaint. In response, Tesco took out advertisements to make full apologies, offered refunds on any products which were potentially contaminated that consumers could bring in to stores, investigated the issue and promised that nothing similar would happen again.
Ms Ceeney is concerned that if banks and other financial institutions do not learn from their customers, in the way that the supermarkets seem to have done, both sides will suffer.
She says: "We've seen a rise in banks talking about 'compensation culture' in a negative way. We are in danger of demonising consumers. Either banks use these issues as an opportunity or they become disenfranchised from their customers."
But some organisations are dealing relatively well with customers. Only 17 per cent of consumers bringing Ombudsman complaints about PayPal win their case, as the money-transfer organisation appears to have a functional, in-house complaints service. Similarly, only 23 per cent of consumers win against Nationwide.
By contrast, 93 per cent of consumers have been winning against Lloyds TSB subsidiary Black Horse. Some products seem either to encourage poor selling procedures or are badly designed.
For example, the Ombudsman finds in favour of 80 per cent of people who complain about mobile insurance cover. For those complaining about travel insurance, nearly half (48 per cent) win their cases at the Ombudsman.
Overall, across all categories of financial product, consumers win in just under half (49 per cent) of cases.
Travel insurer refused to pay for operation
She was 27 weeks pregnant and flying off to New York for a week, but architect Caireen O'Hagan was not worried. She had her travel insurance in place.
There were cysts on her ovaries but these provided no cause for alarm, and her doctors classified her pregnancy as uncomplicated.
But, when she got to the Big Apple in December 2010, one of the cysts became twisted and had to be removed in emergency surgery. The hospital bill came out at $21,000 (about £16,000). So she provided her insurer with all the paperwork it needed, including letters from her doctors saying that the complication had been totally unforeseen.
Nevertheless, the insurer refused to pay on the grounds that the cysts were a pre-existing condition. She then took the case to the Ombudsman which – famously overloaded with handling payment protection insurance claims – took a year to come to its conclusion that the cysts did not represent a pre-existing condition. This was the routine, first-level, informal decision which most financial institutions usually accept and implement. But the insurer opposed this suggested conclusion and so the case rolled on to a formal decision. which came through at the end of 2012.
As well as ordering the insurer and reinsurer to foot the bill, the Ombudsman made an order for £500 compensation.
"The Financial Ombudsman was very good. Every two or three months they sent me a letter," says Ms O'Hagan.
Financial Ombudsman Service: financial-ombudsman.org.uk, 0800 023 4567, @financialombuds on Twitter
Ombudsman: complaints data by organisation: ombudsman-complaints-data.org.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens