The FOS has recently ordered a financial adviser to pay out after falling foul of an email fraud that caused the adviser to authorise the transfer of its client's money to the fraudsters' account.
The FOS' view was that an email requesting a large transfer plus difficulty in tracing solicitors should have raised alarm bells. The FOS has published its decision last week in its newsletter as part of a spotlight on fraud sharing its experience of common scams and warning of an increase in financial fraud, which caused losses of £755 million in 2015 (up by a quarter from 2014).
The FOS endorses vigilance and knowledge-sharing to combat the issue stating "it’s essential that everyone with an insight shares that insight". Given the FOS' engagement on the front line of customer complaints, it is well-placed to monitor and assess such trends as they develop.
In pursuit of further insight, it is worth taking another look at the complaints made to the FOS in the last year and how the FOS has dealt with these complaints (as published in the FOS' annual review of the April 2015 / April 2016 financial year).
340, 899 new complaints were investigated (3.5% more than last year)
438,802 complaints were resolved (2.14% less than last year)
On average, 51% of complaints were upheld (4% less than last year)
The FOS operated a costs base of £257.9m (6.78% more than last year)
56% of complaints related to PPI (7% less than last year)
31% of complaints related to banking and credit (7% more than last year)
9% of complaints related to other insurance (same as last year)
4% of complaints related to investment and pensions (same as last year)
The figures show that the FOS spent more money but resolved fewer complaints than last year. Even with the increase in new complaints, the total increase (including resolved and new complaints) was only 0.3% against a total costs increase of 6.78%. The FOS calculate this as an overall "unit cost" per case of £586 against last year's unit cost of £536.
Given that the FOS' experience of complaints has now developed significantly over the last 15 years, it is surprising that the unit cost per case has increased. One might expect the FOS' costs to have reduced, particularly as the make-up of complaints is very similar to last year.
In March 2016 the FOS reached a total of 1.5 million complaints about PPI (which is half of all complaints received since the FOS was set up in 2001). The wave of PPI complaints has slowed but remains by far the largest cause of complaints made to the FOS. In fact, the biggest spike in complaints this year was caused by the FCA consultation regarding a potential 15 year time limit on PPI complaints. It is likely that PPI complaints will continue to dominate the FOS' capacity for some time.
2. Business complaints by sector
In terms of the businesses complained about, 72% of the new complaints were directed at banks and 10% at general insurers. Just 3.5% of complaints were directed at insurance brokers, 2% at mortgage intermediaries, and 1% at IFAs. As banks sold the majority of policies that are the subject of PPI complaints, the PPI trend is strongly influencing these figures.
In terms of financial products complained about, there are several clearer trends based on recent developments. Complaints about payday loans increased by 178% and complaints about packaged bank accounts increased by 107%, both products having received considerable negative press coverage in the past year or so.
In relation to pensions and investments, the number of complaints relating to Personal Pension Plans (PPPs) has increased by 23% since the pension freedoms came in last year. PPPs are now the largest single contributor of complaints in this area.
Complaints about Self-Invested Personal Pensions (SIPPs) and Small Self-Administered Schemes (SSASs) also increased by 14%. Three quarters of these complaints were about advice to invest in Unregulated Collective Investment Schemes (UCISs), a trend that will be evident to those dealing with claims against professionals and their insurers.
3. How complaints are being made and dealt with
Almost half of complaints continue to be made through claims management companies, but once the complaints relating to PPI and packaged accounts are removed, this drops to 5%.
The FOS has improved its speed in resolving complaints, 66% of complaints being resolved within 3 months. This may come as a surprise to those dealing with long-running FOS complaints on behalf of professionals and their insurers. However, this is explained by the fact that complaints relating to pensions and investments are by far the most likely to be referred to an ombudsman, considerably lengthening the decision time for complaints against insured professionals.
The FOS review states that only 1% of complaints involved redress of over £75,000. However, the most common redress outcome, applied to 41.5% of complaints, involved "telling the business the basis or formula on which they should pay compensation". This redress method often necessarily results in awards of well over £75,000, casting significant doubt on the relevance of these figures.
The overall trend signals a plateau in the overall numbers of complaints and make-up of the type of complaints. This is a welcome change from the turmoil of preceding years in which the number of total complaints received by the FOS nearly doubled to over 500,000 and the unit cost per case jumped by 50% to £720 (in 2013). Hopefully the latest figures indicate a period of stability for the FOS that will allow processes to be refined and outcomes to be achieved with increased certainty and decreased cost.