Horizon scanning with the FOS

Horizon scanning with the FOS

Financial Services analysis: Caroline Wayman, the chief ombudsman and chief executive of the Financial Ombudsman Service (FOS), outlines the key headlines from the FOS’ annual report and considers what the future holds for the coming year.

You have now received over 1.5 million complaints about payment protection insurance (PPI), including another 189,000 in 2015/16. Can you sum up what is happening on PPI (including if you think the issue is dying down at all)?

That’s right, in March 2016 we received our one-and-a-half millionth complaint about PPI, which accounts for half of all the complaints we’ve received since we were set up in 2001. However, the volume of these complaints and the rate at which they’re still arriving—up to 5,000 each week—reflects the scale of the challenge that still remains.

Looking ahead, there are a number of uncertainties that we’ll need more clarity on to help us resolve all the issues people have asked us to look into.

The uncertainty resulting from the Supreme Court case of Plevin v Paragon Personal Finance Ltd [2014] UKSC 61, [2015] 1 All ER 625—involving the level of commission on a PPI policy—has meant that we haven’t been able to progress a significant number of cases as quickly as we would have liked.

We know the regulator, the Financial Conduct Authority (FCA), is looking into what the outcome of the court case might mean in relation to a number of issues—and that could affect how we think about our approach to some PPI cases.

It’s also likely that other affected parties—like businesses and claims managers—will also need to think about what it means for them once we know more. We’re ready to be a part of those wider discussions when the time comes and have the plans we need in place to progress and resolve the cases that we’re currently unable to.

Other uncertainty we must factor in is the possibility of the FCA’s proposed time-bar on new PPI complaints and what that could mean for the ombudsman. If a time-bar is introduced it’s possible we could begin to see higher volumes of complaints once again—at least in the short term.

The current uncertainties are clearly disappointing for all of us. But, despite the continuing challenge presented by PPI, we remain focused on ensuring we’re ready for the future.

I’m grateful for our customers’ ongoing patience and cooperation. As part of our commitment to be transparent, we’re making sure that the individual people affected are kept updated with what’s happening and, where possible, we’re giving them an early indication of what we think the outcome of their case might be. More widely, we’ve shared how we plan to resolve all of the cases that we’ve been asked to look into and we’ll be providing regular updates on our progress.

How have you managed to speed up case-handling?

It is pretty difficult to avoid the ever-evolving world around us. New technologies designed to make our lives easier mean our expectations on how quickly we can get things done are raised higher and higher.

Our customers are no different—with quick and easy methods used around the world to move money, we can switch bank accounts within seven days and obtain loans at the click of a button. At the ombudsman service we need to provide a service that can respond just as quickly when things go wrong. So we’re always trying new ways to adapt and improve how we work to make our customers’ lives easier.

Some of these methods have included sharing information more quickly, challenging red tape and resolving issues early on without the need for a ‘formal complaint’. For example, in the payday lending market, the result of something going wrong can have a considerable impact on someone already facing a difficult financial situation. Speed is crucial to ensuring a situation doesn’t spiral out of control. We’ve been really encouraged by the willingness of some payday lenders to recognise that taking eight weeks to look into a complaint just doesn’t work in these situations and that by working together early on we can remove barriers to finding fair answers at the earliest possible stage.

I’ve been really encouraged by the enthusiasm we’ve seen among the businesses we’ve been working with in this way—the difference it makes to their customers can be so significant.

You published 35,000 decisions in 2015/16. To what extent is the publication of your decisions helping consumers and organisations to understand the issues and handle them better?

It’s our responsibility to share any insight that we think could prevent mistakes from occurring and to help businesses resolve problems as soon as possible—ideally without us having to get involved.

We do this in a number of ways. We publish ombudsman news each month featuring case studies of real-life situations we’ve come across, explaining how we approached unpicking the problem to help the business and their customer move on. This gives tangible insight as to how we may approach a particular problem.

We also publish insight reports and an online technical resource setting out how we approach particular types of complaints across a number of different financial products.

Of course every case we look at features its own individual set of circumstances and we look at these on their own merits. Sharing our ombudsmen’s decisions is an easy and accessible way for people to see how we take our general approach and apply it to the thousands of different problems we’re asked to consider every day.

Businesses tell us they want to apply the lessons that can be learnt from the cases we look at. So our decisions database is a way that anyone can learn more about which key points we think a case turns on—and a way that people can see how the consistency of our approach helps us to reach fair outcomes in individual complaints.

A recent example of this was a case where a mortgage lender’s customer complained that they had discriminated against them because of their age. We upheld the complaint and our decision was published on our online database. The national media took an interest in the case and, after some wider publicity of our decision, we found some mortgage lenders began to rethink their policy and altered their lending criteria in relation to age.

We’re really encouraged to see businesses, independent financial advisers and claims managers using the database to help them resolve disputes at the earliest stage and without the complaint needing to be escalated to the ombudsman.

Over half of complaints relate to four large banks. This suggests that there are persistent problems with their products, sales systems or claims-handling. Is that the case? Are you working with the banks to reduce this? What would you expect the percentage to be in five years' time?

You’re right—four banking groups accounted for 56% of complaints referred to us in the last financial year. But, to put it in perspective, the volume of complaints we receive about different businesses, broadly reflects the size of those businesses. And larger numbers of complaints to us about a particular issue doesn’t necessarily indicate a big problem—increased awareness among consumers about their rights to come to the ombudsman can influence the numbers too.

We regularly spend time meeting the people who work at financial businesses to understand the challenges they are seeing and to share our approach to sorting out problems. We hold workshops for businesses, where we ask complaint handlers to find fair answers to some of the toughest disputes we see, including those involving people in vulnerable circumstances—like people who face losing their home.

You’ll also find us up and down the country talking to individuals in their home town, encouraging consumers who might have a financial problem to talk to the business first so they can try to sort things out.

As well as sharing our insight through all the information we publish, we also work closely with the FCA, so if we do spot a wider problem, we can share it with them.

What is the state of play regarding claims management companies? What percentage of your caseload comes from them? What do you see as the pros and cons of their activity?

We’re a free service, accessible for everyone. What’s surprising is that people are still choosing to use claims managers to bring their complaint to us.

It’s true that over the past few years there has been a dramatic increase in the number of claims manager businesses offering to help people with complaints or claims. When we ask people why they used a claims manager we often find they were under the impression that using a claims manager would be hassle free and save them time.

But the information a claims manager will need from someone is the same information we ask for to look into a complaint. And we won’t take commission from any compensation that’s awarded.

We also hear from people who think their complaint will have more chance of success if they use a claims manager. But that’s simply not the case. We look at each case on its individual merits and we have an inquisitorial role which means that people don’t need to worry about how they present their case to us. We were set up by Parliament to be free and to level the playing field, so consumers don’t need to use a professional service to bring a case to us.

Are there areas of claim (such as packaged bank products) or issues or new trends (such as cases which cut across the traditional categories of financial services) that you would like to highlight?

When we published our annual review we found that people were really interested in five products in particular which, funnily enough, all began with a P—pensions, payday loans, pet insurance, packaged bank accounts and PPI. But what we’ve really tried to highlight is that across these, and all the other products we look into, we found key themes that affected a number of people—like vulnerable consumers being victims of scams or issues relating to power of attorney.

Fraudsters are always coming up with new ways to trick victims out of their money and this can often result in huge amounts of money being stolen. As part of our commitment to raise awareness, we have worked closely with individuals, businesses, and the FCA to share insight about what can be devastating outcomes for many consumers.

Similarly, dealing with issues that arise when someone is losing their mental capacity can be distressing for everyone involved. We see a steady amount of complaints relating to power of attorney and how an already distressing situation can be made much worse due to simple misunderstandings and a lack of communication.

As a result, we shared some simple tips for both bank staff and the people who hold a power of attorney to help prevent most complaints from happening.

Are there are any other issues you would like to raise?

Many people are looking ahead to future developments in the finance industry. Fintech means that more ‘high-tech’ ways of managing our money are developing every day. But we can’t forget that behind every click of a button or app downloaded are real people who may still value the human touch when they want to ask a question or get a problem sorted out.

It’s so important that we and other organisations are able to provide a service for everyone—and be flexible and responsive to how our customers want to interact with us. And despite the fast pace of some of the changes that are happening around us, it’s important not to lose sight of the fact that some things do remain constant—people want simple solutions, to be treated fairly and to be able to trust that, if something goes wrong, their financial services provider will be there for them to help put things right.

Nobody has the perfect solution for all this as things constantly change and evolve. But the important thing is that we continue to listen to what our customers tell us and to share our experiences of when things have worked well, so we can all learn from them in future.

Interviewed by Neasa MacErlean.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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