The Financial Ombudsman Service said complaints about current accounts , credit cards, frauds and scams, were the driving forces behind this increase
Complaints about the banking sector have reached a peak not seen in at least a decade, according to the Financial Ombudsman Service (FOS).
Consumers lodged 80,137 cases with the free resolution service regarding banking and payment products in the financial year 2023/24, a significant jump from 61,995 in 2022/23. The service pointed to concerns about current accounts and credit cards, as well as worries about frauds and scams, as the driving forces behind this surge.
Recurring themes included issues with admin and customer service, alongside perceptions of unaffordable or irresponsible lending practices by financial institutions. Current accounts took the top spot for complaints, racking up 30,635 complaints. Credit card complaints followed closely behind with 24,402 cases, with 13,584 stemming from perceptions of unaffordable or irresponsible lending.
This marked a significant increase from the 14,504 credit complaints and 3,723 complaints about unaffordable lending in 2022/23. Fraud and scam cases also saw a surge, generating 27,312 complaints in 2023/24, with roughly half linked to authorised push payment (APP) scams, where unsuspecting individuals are tricked into transferring money online to fraudsters impersonating legitimate payees.
A spokesperson for UK Finance commented: “The financial services sector takes complaints seriously. Where things go wrong firms will always look to put it right and provide good outcomes for customers. Credit card companies and lenders must comply with strict regulatory rules to assess whether lending is affordable and they also provide a wide range of support to anyone concerned about their finances or repayments. Meanwhile, the financial services industry prevents over £1billion of fraud taking place every year, and is currently the only sector which reimburses victims.”
The ombudsman said it is seeing more cases across the board, with 198,798 new complaints in 2023/24 compared with 165,149 the previous year. The service noted that while its complaint categorisation has evolved, banking complaints for 2023/24 have hit their highest level in at least ten years. Abby Thomas, chief executive and chief ombudsman at the FOS, commented: “It’s always concerning when you see cases rise so significantly, particularly when so many people are struggling in the current economic climate.”
“Whether someone is the victim of a fraud, struggling with credit card debt, or having issues with their overdraft, they deserve support and understanding from their financial provider. It is imperative that all businesses treat their customers fairly and in a timely manner. “If consumers don’t feel they’ve been treated fairly, they should contact our free, independent service and we’ll investigate their complaint.”
The service also highlighted an increase in complaints being filed by claims management companies (CMCs) and professional representatives. These entities were responsible for a quarter (25%) of the total cases in 2023/24, a significant rise from less than a fifth (18%) in the previous year.
The FOS has noted both good and bad practices among professional representatives. It expressed concerns about mass claims submitted by some, and others failing to respond to requests for evidence, which slows down investigations. When complaints are upheld, professional representatives can take a portion of the redress awarded to their clients. However, consumers have the option to take their case directly to the FOS and keep all the compensation.
In recent months, the service has been considering a proposed case fee for professional representatives, with the aim of making the fee model “fairer”. Professional representatives could be charged up to £250 to bring a case, reduced to £75 if the outcome is determined in favour of the consumer.
James Dipple-Johnstone, deputy chief ombudsman at the FOS, said: “A quarter of all cases coming to the ombudsman were brought by professional representatives in the last financial year. While they have an important role to play in resolving financial disputes, they can also gain financially from our service without contributing to the running costs. There is sometimes little evidence of due diligence by some representatives to ensure claims they advance have merit.”
“We are committed to making our service as accessible as possible, while ensuring it remains free for all customers and that those with upheld complaints can keep all of any reward we make.” The FOS has hit back at claims it is “dysfunctional” after unveiling plans to more than treble the fees it charges financial firms. “Our proposed charges aim to ensure we cover the costs associated with resolving disputes while reflecting a fairer allocation of those costs.”
The FOS revealed there’s been an 11% jump in the number of complaints it received in the last financial year, saying it upheld 37% of complaints, up from 35% in 2022/23. Rocio Concha, Which? director of policy and advocacy, said: “These damning figures show how consumers are being badly let down by their banks in important everyday areas including credit cards, current accounts and insurance.”
She added: “It is particularly concerning to see such an increase in the number of complaints about fraud. This underlines the importance of new rules due to come into force soon that will make it mandatory for the vast majority of scam victims to be reimbursed and treated more fairly and consistently.”
