FOS Cites 70% Rise in Financial Products Complaints in First Quarter of 2024: What You Need to Know
An approximate 70% rise in financial product complaints were revealed by The Financial Ombudsman Service in the opening quarter of 2024. Most of them were fixated on credit cards and car finance, where consumers voiced several concerns, such as unattainable lending, exorbitant interest rates, and hazy fee structures. Professional representatives were also named as major players in the rise of complaints. This increase in financial complaints requires a lot of work for the players in the financial sector. More importantly, the issues must be solved to satisfy consumers and protect them.
Key Takeaways
- The Financial Ombudsman Service (FOS) revealed a 70% increase in complaints relating to financial products in the UK in the first quarter of 2024.
- Credit cards scored the highest number of complaints, emphasising the issues of irresponsible and exorbitant lending practices.
- Motor finance accounted for the second most complained-about product, three-quarters which links to the motor finance commission.
- The Financial Ombudsman Service (FOS) obtained approximately 50% of the complaints from professional representatives.
- Consumers can still directly file grievances with the Financial Ombudsman Service (FOS) without the hassle for an intermediary, such as professional representatives.
Understanding the Dramatic Surge in Financial Product Complaints
The FOS recorded a massive rise in financial product complaints in the first quarter of 2024. In its event, it has raised concerns among consumers and regulators. The FOS has issued data on what caused this big change.
Key Statistics and Growth Patterns
From April 1st to June 30th, 2024, the FOS recorded 74,645 financial product complaints. This presents a 70% increase than the total numbers of complaints recorded in the same months last year, which was 43,953. Of the 70% surge, most complaints are associated with irresponsible and unaffordable lending.
Tim Hogg, Director at Fairer Finance, under the consumer research and rating group, said, “Given that interest rates on credit cards have risen over the last few years, it is not surprising that FOS complaints about unaffordable lending have risen.”
On the other hand, Abby Thomas, FOS Chief Executive and Chief Ombudsman, added, “It’s concerning that we’re continuing to see large volumes of complaints, particularly considering the cost-of-living crisis.”
Top Five Most Complained-about Financial Products in the First Quarter of 2024
Credit card complaints hailed number one in financial product complaints obtained by the FOS in the first quarter of 2024. From April to June this year, the FOS captured 18,175 complaints, much higher than the recorded number in 2023, which amounted to 4,189.
Second in rank is hire purchase, with 15,925 related complaints. The recorded complaints in the previous year were 3,678.
The current accounts follow with a record of 8,698. The increase in complaints is not significant this year, as the recorded complaints in 2023 were 7,224.
Fourth on the list is car/motor insurance, with 3940 complaints. Like current accounts, the increase is insignificant since the recorded complaints last year were 3,869.
Finally, conditional sale (motor) ranks fifth with a recorded number of 2,585 complaints. Last year, 1,776 were the total complaints directed at this product.
It should be noted that hire purchase and conditional sale are both forms of car finance.
With this findings, Abby Thomas cited, “It’s vital that businesses are open and transparent with their customers, treating them with fairness and understanding.”
Credit Card Complaints: A Growing Concern
Credit cards were the most faulted financial products in the first quarter of 2024. The FOS recorded 18,175 complaints, 15,580 of which were about irresponsible and unaffordable lending.
According to Tim, “Our polling of the credit card market shows that levels of customer trust and happiness stand below where they were in 2021.” This shows that consumers are becoming more aware of concerns related to credit cards.
Further, Thomas added, “Some consumers do not get the best out of their credit card – partly due to the complexity of the product design and fee structures. There are many scenarios in which customers could feel ‘caught-out’ by their credit card.”
It should also be noted that professional representatives brought over 50% of these complaints.
Car Finance Commission as the Major Dispute
According to the FOS, hire purchase (motor) is the second most complained-about financial product. From April to June 2024, the FOS recorded 15,925 complaints. Approximately three-fourths of these complaints are related to the motor finance commission.
In addition, the FOS noted that consumers contact them because of the following reasons:
- Unfair arrangements in the agreement
- Absence of transparency as to the commission of the broker
The FOS is acting with the Financial Conduct Authority to alleviate these issues.
While the FCA reviews the discretionary commission arrangements in car finance, the FOS corresponds on it.
“The FCA has committed to provide further information about next steps by September 24, 2024,” according to the FOS.
Also, FOS cited that professional representatives brought 90% of the motor finance commission complaints.
Rate of the Upheld Complaints by the FOS
Across all financial product complaints, the FOS upheld 37% of the cases they resolved. Most of these were in favour of the consumers. With this number, the FOS agrees that the complaints were justified, ruling in favour of the consumers and requiring the financial firms to provide resolution and/or compensation.
The following shows the FOS's recorded data regarding the upholding rate for complaints brought by consumers and professional representatives.
The Intervention of Professional Representatives
Of the 74,645 financial product complaints received by the FOS, approximately 50% were from professional representatives. This is much higher than the 17% recorded complaints from professional representatives the previous year.
With this surge of complaints, the FOS reiterates that involving these financial representatives does not guarantee a favourable outcome. As stated in the FOS’s record, in April 2024 alone, 40% of consumer complaints were upheld, compared to 26% of the complaints brought by professional representatives.
According to Abby Thomas, FOS Chief Executive and Chief Ombudsman, “Whilst professional representatives have an important role to play, they must ensure that their cases are well-evidenced and have merit.”
In essence, the FOS advises consumers not to rely so much on the assistance of professional representatives. Consumers may achieve the same results (or even better) by filing complaints independently, as long as they have enough supporting evidence. This further means they will not incur any additional fees that many professional representatives charge.
Frequently Asked Questions
What are the key statistics and growth patterns behind the surge of complaints?
The Financial Ombudsman Service (FOS) revealed a 70% surge in complaints relating to financial products in the opening quarter of 2024. Most appeals were about credit cards and motor finance.
Which financial sectors have been most impacted by the complaints surge?
The surge of complaints has impacted credit cards and motor finance commissions the most. From April to June 2024, 18,175 complaints were filed for credit cards, and 15,925 complaints were registered for motor finance.
What are the primary issues causing credit card complaints?
Consumers’ complaints about credit cards can be inflicted in the perceived irresponsible and unaffordable lending. Consumers have an issue as they feel their credit card debt has become unmanageable because of practices they perceive as exploitative, especially when many people are struggling financially because of rising living costs.
What are the common problems associated with motor finance disputes?
Most of the complaints associated with car finance disputes are related to motor finance commissions. The consumers believe that the terms in the finance agreement are unfair, and many car brokers are not transparent about the commission they receive from the deal.
What are the benefits and cost considerations of seeking professional representation for financial disputes?
Getting help from professional representatives can be helpful. However, this means additional costs on the consumers’ end. In addition, the FOS advises the consumers to file their complaints independently because the FOS has upheld more cases brought by the consumers than those brought by professional representatives.