In October, the Financial Ombudsman Service (FOS) published its half-yearly complaints data for 2023.
Complaints rose by more than 13,000 between January and June 2023, compared to the previous six months and banking and insurance sectors experienced a noticeable increase.
While frauds and scams were responsible for more than half of the new banking and credit complaints during this period, the cost of living crisis and higher expectations for consumer care may also be playing a hand in the rising number of complaint.
With inflation remaining stubbornly high and the full effects of the new Consumer Duty yet to be felt, read on to explore what this could mean for financial complaints in the future.
The cost of living effect
Inflation began rising in 2021 and reached a peak of 11% in 2022. It has since fallen and was 5.6% in October 2023. However, interest rates are expected to remain higher for longer as the Bank of England attempts to bring inflation down to the 2% target by the end of 2025.
As a result, many people are feeling the squeeze of higher living costs, and it’s believed that this could be contributing to a rise in complaints brought against companies selling financial products and services.
Complaints in all sectors increased in the first half of 2023
The FOS’ half-yearly data shows that complaints about insurance and protection products have risen by 26.6%. While mortgage and home finance cases are up 20.2%. In fact, complaints in all sectors increased in the first half of 2023.
If people are struggling to cover everyday costs, they may feel more motivated to pursue compensation for any perceived financial loss, distress or inconvenience caused by a businesses’ mistake.
And, with inflation remaining stubbornly higher than many people are used to, the cost of living could continue to affect complaint volumes in 2024.
Impact of the Consumer Duty
Introduced by the FCA on 31 July 2023, the Consumer Duty aims to ensure that customers receive “good outcomes” and that firms provide evidence that they are delivering these.
FTAdviser has reported that over time, the FCA hopes that rising standards of care could reduce the number of complaints as consumers benefit from improved services and products.
Meanwhile, although the FOS has stated that it does not expect the Consumer Duty to have a significant influence on complaint volumes, higher consumer expectations of financial products and services could potentially lead to an increased likelihood of complaints.
In addition to the volume of complaints, holding financial firms to higher standards of consumer care may influence the outcome of FOS complaints.
Indeed, the half-yearly data shows that 37% of complaints were upheld in the consumer’s favour between January and June 2023 compared to 34% in the previous half year.
Minimise the impact of a complaint on your business
With cash-strapped consumers potentially feeling more motivated to seek compensation and financial firms being held to higher standards of care by the FOS, it makes sense to put yourself in a position to act fast if you receive a complaint.
Remember, you have eight weeks to review a complaint and deliver a response to your client. Responding promptly will not only help to maintain positive client relations but it could also give you time to fully understand and investigate the complaint before sending a written response.
Delivering a comprehensive and fair response may also reduce the likelihood of your client referring their complaint to the FOS. This in turn could save you time and money.
Get in touch
Jencap Partners ensure a pragmatic approach to dispute resolution. From evaluation of the complaint to the “final response”, and beyond, we take care of every aspect of the process and, subject to your PI insurance policy, your legal defence costs may be covered.
Find out more about how we could help you resolve a complaint by talking with one of our experts.