Outlook It’s easy to become blasé about the level of complaints being made by the financial services industry’s long-suffering customers, given how regularly figures are released.
But stop for a moment and think about the enormity of the latest release: by the end of March the Financial Ombudsman Service says it expects to have received an astonishing 125,000 cases, not including the steady flow of work created by the mis-selling of payment protection insurance policies (cases are still pouring in at the rate of about 4,000 a week). Surprise, surprise, the majority of them (a forecast 76,000) relate to banking and credit, representing a significant increase on last year’s numbers.
It’s worth noting here that the ombudsman gets involved only after the consumer has exhausted the financial company’s in-house complaints handing procedures. Yet it still finds in favour of the consumer in about 40 per cent of cases (when it comes to banking). That suggests that the banks’ complaints handling systems are still rejecting far too many. And that all the honeyed words about “serving our customers better” and “building a good, safe bank” amount to little more than spin.
The Financial Conduct Authority is currently in the throes of investigating complaints handling, given the lack of anything resembling progress on this front.
So here’s an idea it might like to consider: make the cost of a complaint going through to the Ombudsman sting.
Currently, regulated firms pay a £550 fee for every complaint received after the first 25 (the complainant pays nothing), against a unit cost of £705 incurred by the Ombudsman for dealing with them. The shortfall is made up by a levy which all regulated financial firms have to pay, even if they don’t incur any complaints.
Now I’d hazard a guess that the reason things aren’t improving is because banks don’t see investing in complaints handling and in service generally as being particularly cost effective.
So it makes sense to make it more cost effective by making going to the Ombudsman more costly. Unfortunately that’s not happening. The Ombudsman is actually proposing to freeze its fees this year. While that reflects well on the way it’s been running things, it doesn’t get us very far.
Now, I’ve already suggested the figure of £1,000 per complaint would be a better place to start. We could add a little spice to the mix by doubling that fee if the Ombudsman finds against the firm. Combined, these measures should more than double the cost of valid complaints going to the Ombudsman.
Increase the cost of complaints like that and you might make it financially worthwhile for institutions to see that it doesn’t get that far in most cases.
Of course it would probably leave the Ombudsman with a chunky cash surplus that it doesn’t need at the end of the year. But spending the funds on programmes to improve Britons’ financial literacy would seem to be a sensible way forward.