Abby delivered a keynote speech at StepChange’s Connected 2024 conference.
She spoke about the role of the Financial Ombudsman Service and the complaints we see about credit and debt. On this page you’ll find that speech in full.
I’m delighted to be here today to talk about the role of the Financial Ombudsman Service – in particular, what we see in complaints that involve credit and debt.
Our role is to resolve complaints between firms that provide financial services – across banking, insurance, consumer credit, pensions, investments and more – and their customers, be they individual consumers or small businesses.
We always give firms the chance to resolve the complaints first, but if they don’t, we are here.
Our service is easy to use, and free at the point of need, to the tens of thousands of consumers and small businesses who bring their complaints to us every year.
We want to ensure that every customer – whether they are a complainant, or a business customer – either gets a better outcome, or is better informed, as a result of using our service.
Handling complaints – and talking to customers about what’s gone wrong for them – gives us a unique perspective of the financial services sector and the customers it serves.
Last year we resolved almost 200,000 complaints.
So, as you can imagine, that gives us a very vivid picture of financial services, what customers are experiencing and how financial businesses are responding when customers are unhappy.
Behind every complaint is a human being.
And, earlier today we heard some very powerful stories about the lasting impact of debt and financial difficulty. Each person here today has shown how important it is to understand a customer’s individual circumstances.
And I’d like to thank you for sharing your experiences and insights with all of us here today.
Transformation and service standards
Sharing insights is an important part of our role.
It helps us play our part in improving financial services and bring the ‘Better Informed’ vision to life. To that end, we're committed to sharing tangible and effective insight about the complaints we see.
We do this in our answers to individual cases. Our decisions are legally binding and all firms are required to learn from our findings.
We want to help firms respond effectively to complaints themselves, because that’s better for customers.
Over the last year, we’ve made changes to our organisational structure to support this, creating sector-specific directorates, covering areas like investments, insurance, or banking.
This new structure is enabling us to discover and share insight with businesses more quickly, helping them serve their customers better.
Where cases do have to come to us, we’ve committed to ambitious targets for our service standards – on timeliness, quality and customer experience – because we understand that people need answers quickly.
And I’m pleased to say that in the year ending March 2024, we more than halved the average time that customers had to wait for a resolution to their complaint, compared to two years ago, while at the same time improving our quality scores.
About our insight – why we share it and how
The new structure also helps us to spot trends more quickly, so that we can share what we’re seeing with regulators, consumer groups, charities and other organisations.
Organisations like StepChange.
Since I joined the Financial Ombudsman, it’s been a privilege to work with StepChange – particularly sharing insights throughout the cost-of-living crisis and on successive Debt Awareness Weeks.
And in return, StepChange regularly share invaluable insights with us, by attending our consumer organisation steering group – and we continue to work together so we can best serve the same groups of customers.
Collaborative relationships like these are invaluable to help us understand the context behind the complaints that come to us.
For example, the reality of all the different ways financial difficulty and debt can impact a person’s life, the individual and intersecting circumstances I referred to a moment ago, that make a consumer’s needs and priorities unique.
Our data – and what it suggests about complaints involving cost of living
Stories, like the compelling stories we heard earlier, enable us to see the lived experience behind the data we share.
Like the complaints data we recently published from the first quarter of this financial year – a 70% rise in cases coming to our service when compared with the first quarter of last year.
It may not surprise you to learn that credit cards are now the most complained about product.
We received over 18,000 complaints about credit cards in the first three months of this financial year. And the vast majority of those – well over 15,000 – were about irresponsible and unaffordable lending.
In fact, we have seen a considerable increase in complaints involving irresponsible lending across banking and consumer credit – we received over 20,000 cases this first quarter, up from a little under 5,500 cases for the same period last year.
What we’re seeing
Whether they come from consumers or their representatives, it’s concerning to see such large volumes of complaints – particularly when they relate to irresponsible and unaffordable lending.
So, when we ask if the cost-of-living crisis is behind us, our complaints data suggests it’s not over for many of the people who come to us for help.
It’s vital that businesses understand this, are open and transparent with their customers, and treat them fairly and with empathy.
There are so many well-established rules and guidelines – including most recently in the Consumer Duty – that are designed specifically to help financial businesses find ways of supporting their customers when the need arises.
But despite this, we’re still seeing cases where customer experience has fallen far short of what it should have been.
We see cases where consumers don’t get a chance to engage properly with the relevant parties before the debt collection process begins.
People tell us their experiences of feeling harassed as part of the debt collection process and how their mental health has suffered as a result.
We hear about people’s experiences of feeling confused and stressed when a debt purchaser says they have to go back to the original creditor if they want to dispute or challenge the debt.
And still we see examples where firms could have done more to support their customer and could have tailored their approach to understand why a problem arose in the first place.
Case example – irresponsible lending to a consumer with a gambling problem
We recently saw a case where a vulnerable consumer complained about a business acting irresponsibly when it accepted his third credit card application.
What you don’t know about this consumer is that he had a gambling problem.
But the business knew.
Despite already having two credit cards, and twice sharing with the business his issues with gambling, he was still able to successfully apply for a third card.
Within two months of opening his new credit account, the consumer had made four money transfers to his current account – enabling him to gamble away more than £6,500.
When the Ombudsman Service looked at the case, our decision was clear – the business was aware of their customer’s longstanding gambling problem and should have foreseen how the funds would be used.
The business failed to consider the consumer’s vulnerability.
As a result, we instructed the business to return all payments with 8% interest, write off the debt, close the account and remove adverse information from the consumer’s credit file.
This case is a prime example of why firms must seek to understand a consumer’s circumstances – only then can they provide the necessary levels of customer service and support.
Both the FCA rules around consumer credit and the Consumer Duty set out clearly what’s required when a customer is struggling to manage.
And firms should ensure complaint-handling teams have a thorough and in-depth understanding of both.
Not least because good complaint handling can repair a relationship and help build trust, but also confidence in financial services.
And just like the members of the earlier panel, the stories are out there.
We share our complaints data because it’s useful to the financial sector and helps us all plan for what’s coming down the road.
But there’s nothing to stop firms using their own complaints data in the same way.
What can a complaint tell a firm about a customer’s understanding of a product, for example?
How can it help a firm evolve their approach?
It’s a firm’s responsibility to take appropriate action to rectify any harm it identifies, including by paying redress promptly.
And it’s better for businesses and their customers if the firm resolves complaints quickly and effectively, without having to escalate them to the Financial Ombudsman.
The requirements of the Consumer Duty have had an impact on what we consider to be fair and reasonable in the individual circumstances of each case.
Every case is unique and we take into account all the facts and evidence from both the financial business and the complainant, and the circumstances of the case, in each one to determine what’s fair and reasonable.
In our approach to publishing data and in our dialogue with stakeholders, we want to continue to be very transparent about what we’re seeing.
We also want to make clear that we are seeing good practice from firms and we're keen to see good practice and good complaint handling shared across sectors and where firms could do more.
What do we think firms could be doing better/differently
The Financial Conduct Authority has also been very clear about the value of firms using complaints to identify where they’re failing customers.
And the Consumer Duty says firms should monitor the quality of their customer service – actively looking for evidence that will tell them where they’re falling short.
Firms can use complaints to gain insights to improve every aspect of their business – from product design to marketing – as well as customer care.
The Consumer Duty emphasises how important it is for firms to proactively identify any potential consumer harm they may need to address.
This is especially the case for consumers in vulnerable circumstances, where the firm must understand the consumer’s needs and provide tailored additional support.
And we know that characteristics of vulnerability include low financial resilience – so that applies to anyone in financial difficulty or debt.
So when financial services come to me and ask how they can do better, we have some key pointers to help them with complaint-handling and customer support.
I would say to firms:
You may be limited by the way your processes or systems work.
You may not always be able to make an adjustment that the customer’s asked for.
But there’s still so much you can do.
You can ensure that all customer-facing staff can identify circumstances as well as characteristics of vulnerability in the customers they serve, and follow best practice in supporting those customers.
You can train your staff – and critically give them the time they need – to listen, to empathise, and to ask consumers what support they need.
You can design policies and practice that focus on finding solutions that help customers, rather than focusing on what you can’t do for them.
You can offer greater forbearance to consumers in financial difficulty and signpost them to relevant support agencies who can give them the advice and support they need.
And you can put your customers’ needs first and foremost when developing and designing each stage of your digital transformation.
Because there will always be a new way to lend and borrow, save and spend.
How can others play their part?
So how can others play their part?
Professional representatives, or claims management companies, now bring around half of the complaints we receive, compared to just 17% in the first three months of 2023/24.
Using a professional representative does not necessarily lead to a more favourable outcome for the complainant. In quarter one of this financial year, only 25% of claims brought by professional representatives were upheld, compared to 40% of those that came directly from consumers using our service free of charge.
And of course, those consumers who were represented, and did not come to the Financial Ombudsman Service directly, may have to pay a proportion of any compensation over to their representative.
So in recent months, we have been consulting on a proposed case fee for professional representatives, aiming to make the fee model fairer and better reflect our costs, as well as to incentivise professional representatives to bring well evidenced cases forward.
We are keen to continue working closely with debt advice organisations and other support services to make sure the referral process and the customer journey at the financial Ombudsman is as easy as possible, and consumers are aware they can come directly to the Financial Ombudsman Service and use our free service at point of need.
Looking ahead
As we look to the future, we – at the Financial Ombudsman Service – want to play our part in creating a healthy industry, supportive of its customers – in particular, supportive at times of financial difficulty or vulnerability.
We want to play our part in building consumer confidence in a thriving, customer focused, competitive financial services sector, supporting growth in the UK economy.
We’re building a service that can quickly adapt to changing expectations, so that we’re ready for the future, to support every generation from Gen Z to those celebrating their centenary.
We can flex to changes in demand and are enhancing our digital capabilities to share answers and insight more swiftly and efficiently.
Our service is accessible to everyone, ready to meet changing demands and staff with experts who can quickly accommodate new areas of work and newly regulated products.
We’re always happy to support firms reach fair outcomes and get a better understanding of our approach.
In fact, financial businesses, professional advisers and professional representatives can all contact our Business Support Hub for free and receive extensive guidance on how to approach complaints.
And we’ll continue to work closely with consumers, their advocates, their advisers, their representatives, firms and the FCA to ensure we’re sharing as much as we possibly can – like our data publications and our approach notes on our website – to support better complaint-handling, especially with consumers in vulnerable circumstances such as financial difficulty.
Thanks again to StepChange for organising this annual event which has brought together different industries to think about the same thing – how can we best support consumers.
It’s been a great opportunity to share what we see in financial complaints and how the Financial Ombudsman Service is playing its part.
Thank you.