When she takes her daughter to school, Fay often talks to other parents there about the Financial Ombudsman Service. "I have told as many people as I can about the Ombudsman," she says. "Quite a few of the mums at school have got mis-sold PPIs [Payment Protection Insurance plans] but they didn't know about the Ombudsman."
Fay (who does not want her identity revealed, for reasons which will become obvious) is different from 99 per cent of other claimants to the Ombudsman. While the service – which published its annual report on Wednesday – has been highly successful in publicising itself to professionals, pensioners, skilled and semi-skilled workers, it has had far weaker results among the unskilled and unemployed. Fay, unable to work because of a disability, and her husband, who lost his job a year ago, come from a tiny percentage (less than 1 per cent) of Ombudsman claimants who are classified as unemployed.
The couple began to get into financial difficulty in early 2009 when he lost his job. When they tried to claim on the mortgage payment protection policy that they had paid for from a major insurance company since 2001, they were told they were ineligible. The problem was, they were informed, that they could not provide sufficient proof that he was seeking work again. Despite the fact that they were getting into debt, forced to borrow from relatives and worried about losing their home, they did not realise that anyone might be able to help them to appeal against the insurance company's decision. "I had heard of the Financial Ombudsman but I thought they were people who regulated banks," says Fay. "I didn't know they dealt with such small things as our case."
The couple only came into contact with the service when they got a round robin leaflet from a claims management company asking if they had been missold a PPI policy. Fay's husband decided to give it a go. The company lodged a claim on their behalf with the Ombudsman. Even this nearly went astray as the company stopped acting for them a few months later – but the claim was put back on course when Fay went to consult Citizen's Advice.
Fay's inquiry is one of 925,000 made to the Ombudsman in the year to March 2010. Although she is unusual in coming from an unemployed household, she is highly representative in the nature of her complaint. PPI is currently the top area of complaint, accounting for three out of 10 cases the Ombudsman handles, and up 58 per cent on 2008/09.
The financial services industry has a shocking record on PPI. As with endowment mortgages and various other products, banks and other institutions appear to have systematically missold this type of plan. To make matters worse, many institutions have then systematically turned down complaints, justified or not, by their customers about these policies.
Adam Samuel, a compliance consultant for the financial sector who used to work as an Ombudsman himself, says: "In some areas, such as PPI, where financial institutions are still playing games, going to the Ombudsman is, frankly, the only way forward for consumers."
Taking a case is fairly simple. Consumers need to have made a complaint to the financial institution involved first, and they either need to have got a reply from that firm (with which they are not satisfied) or not to have received a final reply to their complaint in eight weeks. Many individuals complain through claims management companies, but the Ombudsman's procedure is so user-friendly that they can usually do it easily themselves. Complaints management companies also take a fee or commission, and some of them do not provide much of a service.
A lot of information is available about complaining on the website www.financial-ombudsman.org.uk or via the helpline 0300 123 9 123. Help is available in over 50 languages, Braille and audio. In fact, the Ombudsman is extremely skilled at dealing with the public. Samuel is a severe critic of the Ombudsman in some ways, but he says: "It takes an enormous effort to deal with the public well. There is a genuine outreach effort."
Complaining to the Ombudsman costs nothing and its decisions are binding on the financial institutions involved. In 50 per cent of cases at the moment it is finding in favour of complainants. People who go through the courts, in comparison, have to represent themselves, will sometimes have to pay court fees, can wait months for hearings, undergo a very stressful process, and, even if they win, often have problems getting the institution they claimed against to pay up.
With the Ombudsman, 38 per cent of cases were resolved in three months in 2009/10, and the aim is to push that up to 55 per cent this year. There is also a fast-track scheme for people, like Fay, who are suffering financial hardship. The chief regulator, the Financial Services Authority, also makes a concerted effort to ensure that institutions do pay promptly all the compensation sums that the Ombudsman orders them to make.
Another differentiating feature between courts and Ombudsman is that while courts concentrate on the cases in hand, the Ombudsman tries to improve the behaviour of the institutions by giving them feedback and, more recently, publishing the proportion of complaints it upholds against them. The publication of these decisions was the parting shot of Walter Merricks, the man who ran the service for its first decade, standing down last year.
Even though only two sets of complaints data have been published so far, the behaviour of some firms seems to be improving. Lloyds TSB Insurance Services, for instance, was losing 92 per cent of cases before the Ombudsman in the first half of 2009, but this fell to 57 per cent in the second half. Capital One Bank (Europe) was losing 91 per cent in early 2009, a figure which fell to 78 per cent in the latter half of the year.
The best firms still lose over 10 per cent of complaints before the Ombudsman. These include: Liverpool Victoria (11 per cent), Scottish Friendly (14) and the Prudential (15). The ones with the worst records include: Eisis (losing 100 per cent of cases), Ocean Finance and Mortgages (100) and the now-closed Wills & Co Stockbrokers (98).
But, in the specific area of general insurance complaints, some household names are still losing more than nine cases out of ten in front of the Ombudsman, including Barclays Bank, Black Horse Ltd (a part of Lloyds TSB), the Co-operative Bank, Northern Rock (Asset Management), MBNA Europe Bank and Clydesdale.
Over the next year, the new Chief Ombudsman, Natalie Ceeney, is planning to research the way the organisation physically communicates with the outside world in order to meet people's growing expectations in the year ahead.
She says: "In a world of iPhones and Twitter, consumers are becoming increasingly confident."
The challenge of the next decade will be "to meet large-scale demand for personalised service-delivery", she adds. Younger people appear to be far more confident about complaining than older people, so we can only expect the caseload to grow. It is highly likely that this year will be the first in which more than a million inquiries are made to the Ombudsman service.
In order to deal with the surge in work, the Ombudsman has increased its staff numbers by about a third over the last few months. Although Adam Samuel believes that "there is no alternative" to the Ombudsman scheme, he wants to see some changes. "Staff aren't properly trained," he says. "The scheme is slow, erratic and inconsistent."
Like most other complainants, Fay does not know how well the Ombudsman is handling her case compared to others. But she does know how she feels about the situation she is in and the way the Ombudsman is treating her.
As other people will know who have experienced similar problems, her position is highly stressful. "It's caused problems at home," she says. "It's put a massive strain on our marriage."
If their insurer had paid the mortgage when Fay's husband lost his job, the couple would have been short of money but they would not have feared losing their home. If the Ombudsman decides in their favour, they will heave a huge sigh of relief.
In the meantime, they have cut back on all non-essentials. "We haven't argued about it but we are discussing it constantly," she says. "You don't want to be talking about it all the time. And we don't have the money to go to the cinema or out for dinner or to buy each other little presents – those things you do to show you love each other."
But dealing with the Ombudsman has helped Fay's sense of pride. Her self-esteem fell when the insurance company refused to pay and accused her of misunderstanding the true situation and changing her story. "It makes me feel very small and rather unintelligent," she says. "We have this big insurance company saying that I don't know what I am talking about."
Talking to the case-handler at the Ombudsman scheme has helped her to regain some of her self-respect. Even if the Ombudsman finds against the couple, at least the case-handler has treated them seriously. "He's been working really hard on the case and he keeps me informed," she says. "He's been marvellous."
Financial Ombudsman Service: Facts and figures
* The Financial Ombudsman Service handled a record number of complaints in the past year, climbing to 925,095 consumer enquiries in the 12 months to the end of March 2010, which works out as more than 3,500 complaints each working day.
* The ombudsman resolved 166,321 disputes between consumers and financial services firms during the 12 months to the end of March 2010, 46 per cent more than the previous year. Compensation was awarded to consumers in half of all the cases the ombudsman looked at.
* Payment protection insurance disputes were the most common reason for the FOS to become involved. The much-criticised insurance covers debt repayments if the policyholder is unable to work due to an accident or illness or if they lose their job. But millions of the policies were mis-sold by banks and other lenders prompting a deluge of complaints. Some 95 per cent of the PPI disputes referred to the FOS involved people who believed they had been mis-sold the cover.
* Three out of every 10 new cases referred to the ombudsman service related to PPI, with the number of complaints about the insurance climbing 58 per cent on the previous year, which had itself seen a three-fold rise compared with the year before.
* Insurance disputes increased by 38 per cent during the year, mainly due to the rise in complaints about PPI.
* Complaints about banking and credit products rose by 30 per cent, largely because of the increasing number of people in financial hardship complaining about unauthorised overdraft charges. Complaints about unsecured loans and financial hardship climbed while complaints about consumer credit (including "point of sale" loans, catalogue shopping and credit broking) more than doubled. However the number of disputes relating to traditional credit cards and mortgages levelled off.
* Claims management companies continued to increase their profitable businesses with the proportion of complaints referred to the ombudsman service by companies on behalf of consumers increasing to 28 per cent of all cases from 26 per cent the previous year.
*The ombudsman says it resolved 38 per cent of all disputes within three months and 67 per cent of cases within six months.
* The Financial Services Ombudsman was set up in 2000 with the mission to settle 25,000 disputes a year. This year it says its expecting to resolve 200,000 disputes.
* To contact the FOS go to www.financial-ombudsman.org.uk or call 0300 123 9 123.