Latest figures from the Financial Ombudsman (FOS) show that complaints about borrowing – ranging from store cards to payday loans – have risen by 40% in the past year. Concerns have been raised about lenders’ treatment of customers with high-cost loans.

Excluding complaints about payment protection insurance, almost one in four complaints to the ombudsman service were about consumer credit. These complaints have increased by 40% in the last financial year to just over 36,300. The ombudsman has upheld 61% of complaints about payday loans.

The total number of overall complaints received has gone up by just 6% in the last year.

Some 58% of cases were also upheld following complaints about high-cost instalment loans – many of which saw existing debts refinanced and then repaid over a longer period of time.

Overview of complaints:

  • 45% PPI
  • 11% loans and credit
  • 9% current accounts (including packaged accounts)
  • 4% car and motorbike insurance
  • 3% warranties, mobile cover, home cover
  • 3% credit cards
  • 2% bank transfers, electronic money and banking services
  • 2%  mortgages
  • 2% household insurance
  • 1% pension products
  • 5% other products
  • 13% other problems

Caroline Wayman, Chief Ombudsman, said: “People buy a whole range of things on credit – from everyday household appliances to a car – and in many cases it is manageable and affordable.For some people, borrowing may be a necessity rather than a choice. There can be a very fine line between getting by and going under. Even people who seem to be on top of their finances can quickly become vulnerable.”

Jason Wassell, Chief Executive of the Consumer Finance Association (CFA) said “Obviously our members take complaints very seriously. However, there are a number of reasons why we are seeing such figures reported, including the historic nature of these complaints, strongly held disagreements with the FOS on interpretations and the growing involvement of Claims Management Companies looking to generate complaints.”

”What we can say, is that most customers borrow without any problem. Changes in recent years mean that people are paying less to borrow, they are less likely to attract additional fees and costs are capped.”

Georgie Frost, consumer advocate at GoCompare said “A high level of complaints is often a sign that consumers are not being treated fairly.  But by the time someone’s issue has reached the Ombudsman, it is likely to have been going on too long, with the individuals concerned subjected to considerable stress.  It is clear from the report that problems around payday loans aren’t going away, while the figures also point to growing issues relating to hiring, leasing and renting, as PCP car finance deals have become more widespread.”

“There is a bigger issue for the whole industry to take on board here.  We know from the FCA’s report last year that many people are already struggling. Half the population are said to be financially vulnerable with one in six unable to cope with a £50 increase in monthly bills, with many using credit just to keep their heads above water. Long-term customers with expensive debt are very profitable for firms who have little incentive to tackle the problem of over-indebtedness.

“The industry needs to face up to its responsibilities by doing more to control unsustainable borrowing at the source, as well as improving the way it manages the impact of debt problems once they occur.”

The FOS report detailing the complaints data in more detail can be viewed here.

 

 

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