The Financial Ombudsman Service (FOS) has released its latest complaints data which shows that complaints against high-cost short term loan providers (payday lending) rose by 130% in March. High-cost short term lending complaints accounted for 39,715 of the new disputes.

FOS said the surge of complaints in the sector contributed to a 14% rise in complaints across the financial sector, has reached a five-year high of 388,392 over the 12 months to March.

Caroline Wayman, FOS’ Chief Executive, said “The rise in payday complaints isn’t solely down to any one lender. We’re concerned that various businesses are failing in their duty to assess the affordability of debt, and aren’t learning enough from the complaints we’ve resolved – and we’re hearing from more and more customers who’ve been left to struggle with unsustainable debt.”

“The past 12 months have been our busiest for five years. People brought more than 388,000 complaints to our service – up 14% on the year before. All in all, we dealt with nearly 1.7 million phone calls, emails and letters from people concerned about their money.”

“These are big numbers. One of the trends behind them is the rise in complaints about consumer credit products and services – which grew by a further 89%, following last year’s 40% increase. When PPI is excluded, they represented one in every three new cases we received this year.”

“What we’ve seen in this sector has been unacceptable: in too many cases, customers have been left to struggle with unsustainable debt. Looking at short-term lending in particular, the proportion of complaints we upheld – around six in every ten – shows diligent lenders have been the exception. At the end of a volatile year that saw lenders collapse as a consequence of past unfairness, it’s vital that those remaining don’t allow history to repeat itself.”

“It’s not only borrowers who’ve lost out. As this annual review highlights, we’ve also raised concerns about potential vulnerability and harm in other areas – for example, warning insurers about penalising customer loyalty, and challenging banks to deliver fairer outcomes for victims of fraud.”

“We also saw on a large scale the implications of the ongoing shift to online banking – as a major IT failure, as well as several smaller ones, affected millions of people and generated many thousands of complaints. Regardless of whether such problems are avoidable, we’ve stressed to banks that, in putting things right, they need to consider the impact on individual customers – which in some cases had been significant.”

“Along the way, we also received our two-millionth complaint about PPI. This example of mass mis-selling fundamentally changed our service – as we faced the reality of dealing with customer detriment on a scale we hadn’t seen before, and haven’t since. As the FCA’s complaints deadline of 29 August approaches, we’re standing ready to help all the people who ask us for clarity about their PPI.”

“In what’s been a really challenging year, people’s satisfaction with our service has remained high – along with public trust. And we’ve continued to use feedback, including the independent review of our service published in July 2018, as an opportunity to do things even better. That’s been especially important as we’ve been preparing to take on two new jurisdictions – for complaints about claims management companies, and from more small business customers of financial services – and as we look ahead beyond PPI, to an increasingly diverse and complex mix of complaints.”

In response to the FOS annual review published a spokesperson from the Consumer Finance Association (CFA) said “It is important to make clear that this sector has changed massively, and most of these complaints date back a number of years. These figures show a deeply disappointing increase, driven by a flood from claims management companies and we continue to see many a complaint that has no foundation.”

“Now nearly 9 in 10 of complaints to firms are generated by these companies. The complaints are often of poor quality. Regardless of who submits the complaint, it is the lender that has to pay a case fee to the Financial Ombudsman Service (FOS), win or lose. For this reason, there is no deterrent for CMCs not to submit incomplete or fraudulent complaints. These factors distort the figures reported today but also have a knock-on effect, causing delays for those that have valid complaints.”

“We also have concerns as to how the FOS calculates some of the figures included in its annual review. CFA members have reported inaccuracies in their company figures, supplied by the Ombudsman, which make up the total number of complaints. Inaccuracies include a significant proportion of complaints being reported by the FOS as upheld, when the opposite was true. Complaints which are withdrawn are being counted as new complaints, but no account is taken of them in the upheld rate.”

Most complained about financial products complaints in the year to March 2019:

1. PPI: 180,507

2. Current accounts: 41,069

3. Payday loans: 39,715

4. Credit cards: 13,940

5. Motor insurance: 12,977

6. Mortgages: 10,087

7. Hire purchase: 8,943

8. Unsecured loans: 6,806

9. Buildings insurance: 6,723

10. Instalment loans: 5,162

The rise in high-cost short term lending complaints more than offset a drop in PPI complaints, which accounted for fewer than half of new disputes for the first time in a decade, as the deadline for complaints closes in August.