Credit complaints soar

Posted in 'Personal Finance' by Richard Catlin

04 June 2009

Increased public awareness of the mis-selling of Payment Protection Insurance (PPI) selling alongside general dissatisfaction with lenders has seen a record number of people take their complaints to the Financial Ombudsman Service (FOS).

The FOS investigated over 127,000 cases in the 12 months to March, 40% more than expected. Complaints about PPI alone tripled in the same period, following the publication of the Competition Commission report that will ban the selling of insurance policies alongside loans from October 2010. The Financial Services Authority (FSA) has taken things a step further and has successfully lobbied lenders to withdraw their packaged PPI on unsecured personal loans from the start of June this year.

This is great news for consumers in the short term, but there are also warnings now being sounded that the cost of credit will increase across the board, as lenders seek to recoup the hundreds of millions of lost profit they will suffer as a result of withdrawing from commission-laden PPI.

Complaints about credit card providers have also soared in the past 12 months, as consumers fight back against sneaky interest rate increases. 18,000 complaints were received – up 30% on last year, and the Ombudsman also reports that a large proportion of these complaints have been upheld.

Whilst the number of complaints being lodged with the Ombudsman won’t help consumers to choose between lenders, the publication of detailed data on exactly how the complaints were spread between financial institutions should.

From September, the Ombudsman is set to follow in the footsteps of MPs’ expenses and transparency. Lenders will be named and shamed – detailing exactly how many complaints they were each involved in.

The release of this information has been aggressively resisted by many financial institutions. Even the FSA is showing no signs of following suit – resisting calls for it to publish figures on the number of cases it resolves without having to involve the Ombudsman.

It is widely believed that the publication of complaints data will allow consumers to make more informed choices when choosing a lender or insurer, and will force financial institutions to make more of an effort both to provide better customer service in the first place and to work harder to resolve issues.

Until such time as details of complaints against lenders are actually released, you can still get a firm indication of how the UK’s top lenders compare, based on the experiences and feedback of real customers, by checking our 2009 Banking and Credit Card Survey results - which have just been published.

Coupled with our free Find a Lender Service, you’ll be able to use the experiences of other consumers to avoid lenders who constantly disappoint – and because we use your credit score to find lenders who are matched to your credit rating, you can increase your chances of being accepted first time.