Reflecting on the FOS Annual Review

The Financial Ombudsman Service (FOS) has published its annual review for 2018-19 today. Within its review, the FOS reports on some complaints trends and data for the previous year. The review provides details of complaints about consumer credit, which includes high-cost short-term credit. The figures published show a disappointing increase, largely driven by Claims Management Companies (CMCs) and we continue to see many a complaint that has no foundation.

More than 9 in 10 complaints over the last year were generated by these companies. Regardless of who submits the complaint, it is the lender that must pay a case fee to the Financial Ombudsman, win or lose. For this reason, there is no deterrent for CMCs not to submit incomplete or fraudulent complaints.

CMCs will often try to flood lenders with complaints. Just in the last month, a number of lenders had 1,000 complaints from one CMC in a 24-hour period. One leading lender also found a quarter of the complaints were from people that had never had a loan with that company.

From recent discussions with members, we also have concerns as to how the FOS had calculated some of the figures included in its annual review. CFA members have reported inaccuracies in their company figures, supplied by the FOS, which form part of the total figures included today. Inaccuracies include a significant proportion of complaints being reported by the FOS as upheld, when the opposite was true. Complaints which are withdrawn are being counted as new complaints, but no account is taken of them in the upheld rate. The uphold rate is an important measure as the FOS uses this as an indicator of how well firms are handling their complaints.

All these factors distort the limited amount of data reported today, but also have a knock-on effect, causing delays for those that do have valid complaints. As a trade association, we continue to report instances of poor behaviour from CMCs to the relevant regulators and engage closely with the FCA on the problems lenders are seeing. While the FCA took over regulation of CMCs on 1st April, there are still many firms not acting in the best interests of the customer.

Our members are concerned about the quality of decisions made by the FOS. We believe this, coupled with an extensive backlog of cases, makes it very difficult for consumers and businesses to have trust in what the FOS is saying.

The limited amount of data provided by the FOS to accompany the review also does nothing to improve trust in the FOS. The CFA is resorting to a Freedom of Information request to find out really basic information, which should have been provided by the FOS, such as the number and proportion of complaints about short-term lending upheld by the FOS in the last quarter and over the year as a whole.

The CFA believes a wider review of the FOS is necessary to ensure it can meet its operational demands, while maintaining impartiality and fulfilling its remit.