1 April 2006 to 31 March 2007
We resolved a total of 111,673 cases in the financial year 2006/07 - including 63,877 mortgage endowment complaints.
| year ended 31 March |
complaints resolved |
|---|---|
| 2002 | 39,194 |
| 2003 | 56,459 |
| 2004 | 76,704 |
| 2005 | 90,908 |
| 2006 | 119,432 |
| 2007 | 111,673 |
We resolved 10% fewer mortgage endowment cases than in the previous year - primarily as a result of dealing with a larger proportion of more complex cases relating to smaller businesses, where the benefits of scale we have developed when dealing with larger financial services groups are more limited.
This decrease in the number of mortgage endowment complaints we settled led to a small reduction of 6.5% in the total number of cases we resolved during the year. However, this overall figure is still the second highest recorded - and is four times the number of cases we resolved in the financial year 2000/01, when our predecessor ombudsman schemes merged to form the Financial Ombudsman Service.
During the year our adjudicators were able to settle most disputes informally - through mediation and recommended settlements. This reflects our aim to take as flexible and pragmatic an approach as possible to resolving complaints - using the dispute-resolution tools most appropriate to the individual circumstances of each case.
For example, mediation usually involves our negotiating a constructive way forward - satisfactory to both sides - without seeking to apportion any blame for what may have gone wrong in the past between the business and its customer.
Where informal intervention does not help settle a dispute, adjudicators can issue an adjudication on a case - a document setting out our recommendations about whether the complaint should be upheld. In most cases, both sides accept the recommendations. But either side can ask instead for a review and final decision by an ombudsman. This happened in 6% of cases during the year. A decision by the ombudsman is final - it is the last stage of our dispute-resolution process.
Where disputes are outside our jurisdiction, this is usually because consumers have left it too late to complain. During the year around one in five of the mortgage endowment disputes we handled turned on whether the business involved had correctly applied the endowment "time bar" rules (as set out in the FSA's complaints-handling rules - the "DISP" section of the FSA's Handbook).
Other than in exceptional circumstances, we are not able to consider the merits of a complaint where a business has properly applied a "time bar" - and their customer's right to complain has therefore expired. Disputes about "time bars" form a significant part of the workload of the ombudsmen who are called on to make final decisions on our jurisdiction in cases such as these.
Where we uphold a complaint in favour of a consumer - either wholly or partly - there are a number of ways in which we can put matters right, depending on the individual circumstances of the case. These include:
Where we do not uphold a complaint in favour of a consumer, we aim to give a clear explanation of why we believe the business has treated its customer fairly. Sometimes, if the business itself had made a better job of doing this, it could have prevented the complaint from arising in the first place. Sometimes our explanation simply reinforces - from an impartial standpoint - what the business has already set out clearly for their customer.
We know that any decision of ours will come as a disappointment to the side that doesn't hear from us what it most wants to hear. However, whatever the outcome of an individual dispute, we hope we will have "added value" by giving our view on the case fairly, authoritatively and impartially.
We have focused on this as a key message during the year - in the light of research suggesting that consumers frequently thought our sole purpose was to resolve complaints in their favour, as the "consumer champion". Advertising that we ran on a trial basis - as part of an initiative to improve our accessibility to some ethnic groups who currently use our service less than the majority of consumers - was designed to present a more down-to-earth and realistic picture of what our work in settling disputes achieves.
The chart below shows the time it takes to settle disputes that are referred to the ombudsman service. For complaints about banking, insurance and investments other than mortgage endowments, we resolved over half of the disputes within three months.
Our ability to handle mortgage endowment complaints as quickly as we would have liked has been affected during the year by the increased proportion of these cases now involving smaller businesses. In these cases, we are no longer able to benefit from the efficiencies and economies of scale that we developed when dealing with significant volumes of cases about the largest financial services groups. Mortgage endowment complaints take between six and nine months to settle, on average.
Cases involving hard-fought arguments and entrenched attitudes are also becoming more common, as increasingly some businesses take a legalistic approach to dispute resolution, and consumers become more demanding and less willing to concede. This has a direct impact both on the time it takes us to resolve disputes and on our unit cost and productivity.
| year ended 31 March | resolved within 3 months | resolved within 6 months | resolved within 9 months | resolved within 12 months |
|---|---|---|---|---|
| 2007 | 34% | 61% | 76% | 85% |
| 2007 (excluding mortgage endowment complaints) |
51% | 81% | 89% | 92% |
| 2006 | 32% | 59% | 75% | 85% |
| 2006 (excluding mortgage endowment complaints) |
43% | 74% | 84% | 89% |
| 2005 | 32% | 64% | 80% | 90% |
| 2005 (excluding mortgage endowment complaints) |
42% | 72% | 82% | 88% |
Our "quality, information and knowledge" team co-ordinates our quality-improvement activities - working across all areas of the organisation to develop new approaches to quality and to provide process improvement and project-management expertise.
Underpinning our commitment to continuous improvement is our extensive programme of stakeholder research - by which we can better understand what our customers want, how they rate the service we provide, and where we could do things better. During the year we extended our range of research activities. This included:
Results and feedback from these various stakeholder-research activities are shown in more detail in the chapters who complained to us and who the complaints were about.
We continue to develop our knowledge-management systems - with over 85% of the financial products and services about which we receive complaints now covered by "KIT", our in-house knowledge management toolkit. During the year, KIT was further developed to take account of areas of activity that came under our new consumer-credit remit with effect from April 2007. This was part of a wide range of work in preparation for handling complaints about some 80,000 businesses with a consumer-credit licence, who had not previously been covered by the ombudsman service.
Recognising where we have made mistakes - and learning from any shortcomings - is a vital part of our commitment to quality. This is why - just like the businesses whose complaints we handle - we have our own formal complaints procedure for people who are unhappy with the service we have provided. These complaints are handled by a specialist group of complaints handlers, working as part of our "quality, information and knowledge" team. Where we cannot resolve a complaint about our service, it can be referred to the independent assessor.
[the independent assessor's annual report »]
Our quality system feeds back into the organisation everything we have learnt from analysing stakeholder input, as well as data from complaints and our quality audit - against a common root-cause analysis-framework. This includes providing feedback to individuals and teams - so that changes can take place "locally" within the organisation - and to senior management for more strategic improvements.
The Financial Ombudsman Service is funded by an annual levy paid by the businesses we cover - and by case fees that we charge each business for the third (and any subsequent) dispute involving them that we settle during the year. We do not charge businesses a case fee for the first two disputes each year.
Our budget is calculated on the basis of workload forecasts that we consult on publicly each year in January and February - before the start of the new financial year.
Following consultation in January and February 2006, the boards of the FSA and the Financial Ombudsman Service agreed a budget for the ombudsman service - for the financial year 2006/07 - that assumed income of £59.3 million, expenditure of £59.3 million and a unit cost of £472.
The actual figures for the year showed that our income from case fees was £6.9 million below budget - reflecting the impact of dealing with a higher proportion of more complex and time-consuming disputes, many of which involved smaller businesses that did not pay case fees because they had fewer than three complaints during the year. (As explained above, we charge businesses only for the third and any subsequent dispute each year.) Similarly, case fees did not apply in a significant number of the mortgage endowment disputes where we decided the complaint was "time barred" under the FSA's rules - and was therefore outside our remit.
| our income and expenditure (summary) | actual year ended 31 March 2007 £m |
budget year ended 31 March 2007 £m |
actual year ended 31 March 2006 £m |
actual year ended 31 March 2005 £m |
|---|---|---|---|---|
| income | ||||
| annual levy | 16.6 | 15.8 | 11.7 | 12.4 |
| case fees | 36.1 | 43.0 | 39.8 | 31.2 |
| other income | 0.4 | 0.5 | 0.5 | 0.4 |
| total income | 53.1 | 59.3 | 52.0 | 44.0 |
| expenditure | ||||
| staff-related costs | 42.5 | 46.0 | 40.5 | 34.7 |
| other costs | 9.7 | 9.7 | 8.9 | 8.2 |
| financing charges | 0.3 | 0.3 | 0.3 | 0.2 |
| depreciation | 2.5 | 3.3 | 2.9 | 2.7 |
| total expenditure | 55.0 | 59.3 | 52.6 | 45.8 |
| surplus/(deficit) | (1.9) | 0.0 | (0.6) | (1.8) |
The figures for the year ended 31 March 2007 are drawn from our unaudited management accounts. Both years shown exclude any adjustments for the accounting standard FRS17 on pension accounting. The directors' report and audited financial statements for 2006/07 are available separately [PDF version opens in new window].
Our total expenditure for the year of £55 million was £4.3 million below budget - mainly due to lower than expected staff costs. Staff costs fell as the number of our employees declined over the year - from the "headcount" figure of 1,015, as originally approved in our budget for the year, to 956 employees in post at the end of March 2007. This was in line with our general policy not to replace people who left. We explained this policy - as part of our plans for dealing with the reducing volume of new cases - in our corporate plan & budget published in January 2007.
The amount of bad debts during the year was £0.5 million - as a result of businesses covered by the ombudsman service going out of business, leaving case fees unpaid with no realistic chance of recovery. Around a half of this amount related to seven firms.
| year ended 31 March |
average numbers resolved |
|---|---|
| 2002 | 3.7 |
| 2003 | 4.9 |
| 2004 | 4.9 |
| 2005 | 4.4 |
| 2006 | 4.5 |
| 2007 | 4.1 |
| year ended 31 March |
our unit cost* (£) |
|---|---|
| 2002 | 684 |
| 2003 | 518 |
| 2004 | 473 |
| 2005 | 496 |
| 2006 | 433 |
| 2007 | 484 |
*Our unit cost is calculated by dividing our total costs (before financing charges and any bad debt provision) by the number of cases we complete.
Our unit cost for the year was £484 - compared with an estimated figure in the budget of £472, and a figure of £433 in the previous year. This increase is due to a combination of our settling fewer "chargeable" cases - and the lower productivity of our adjudicators as the nature of complaints changes. Productivity - which we define as the average number of cases resolved weekly by each adjudicator - was 4.1. In previous years' annual reviews we have explained that the productivity levels achieved in earlier years reflected exceptional circumstances specific to that period - in particular, the significant economies of scale in connection with handling very large volumes of mortgage endowment cases.
This annual review is published in accordance with paragraph 7 of schedule 17 of the Financial Services and Markets Act 2000.
