UK Banking Complaints Surge 70% on Credit Cards, Car Finance – BNN Bloomberg

(Bloomberg) — Complaints from bank customers in the UK over financial products soared 70% last quarter from a year earlier, mostly driven by disputes linked to credit cards and car loans, according to the country’s Financial Ombudsman Service.

New complaints jumped to almost 75,000 in the three months through June, from about 44,000 in the same period in 2023, the ombudsman said in a statement on Thursday. Of them, more than 18,000 were about credit cards and roughly 16,000 around motor finance, it said. 

“It’s concerning that we’re continuing to see large volumes of complaints, particularly considering the cost-of-living crisis,” said Abby Thomas, chief executive and chief ombudsman of the FOS. The body was set up by the government in 2001 to help resolve disputes between consumers and financial service firms.

The latest data show the scope of the challenge British regulators are facing even as past auto lending practices have come under scrutiny after consumers alleged their loans were priced in a way that treated them unfairly while banks pocketed money in so-called discretionary commission arrangements with dealers, a practice banned in 2021. 

The Financial Conduct Authority has warned motor finance firms to begin preparing for additional costs that may arise from its review of car finance products. Already, Lloyds Banking Group Plc, the biggest provider of car finance, has set aside £450 million ($594 million) to pay for possible compensation and other costs linked to the ongoing probe, while Close Brothers Group Plc has said it won’t pay any dividends for the 2024 financial year as it looks to strengthen its balance sheet.

Separately, the FCA said Wednesday that it plans to investigate how pure protection insurance products are sold following concerns surrounding commissions and worries that some products may be providing poor value and competition may not be working well. The Payment Systems Regulator is also grappling with rising fraud claims and is racing to put a new regime in place by Oct. 7 and help tackle scams.

In its Thursday statement, the ombudsman urged consumers to bring their complaints directly to the FOS as the service is free. “Using a professional representative doesn’t necessarily lead to a more favorable outcome,” it said, pointing out that only 25% of claims brought by law firms and other representatives were upheld, compared to 40% of those that came directly to the FOS.

While “professional representatives have an important role to play, they must ensure that their cases are well evidenced and have merit,” it said.

The ombudsman also added that it’s been consulting on a proposed case fee for professional representatives to help defray its own costs, and an update will be provided in the coming months. 

In its current model, the FOS is funded by a combination of case fees and annual levies paid by businesses regulated by the FCA. The ombudsman’s operating expenses are projected to go up by about 14% to around £252 million in the current fiscal year, according to its latest budget. 

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