Customer complaints against financial services companies surging again

More evidence of the weight of claims over loan insurance mis-selling has emerged with the latest complaints figures from the financial ombudsman

The service, which deals with unresolved issues between customers and financial institutions, said it received 149,925 new complaints in the first half of the year. This was 54% higher in number than the previous six months.

The increase was driven by payment protection insurance (PPI) complaints. Nearly two-thirds of the new complaints, 98,632, were about PPI.
"This period coincided with the time when most of the High Street banks and some other financial businesses had put PPI complaints on hold, because of their legal challenge against the ombudsman service and Financial Services Authority," said Natalie Ceeney, the chief ombudsman.

"As a result, complaints in this period about PPI were harder fought and harder to resolve - particularly if we found in favour of a consumer."
In 47% of cases during the first half of the year, the ombudsman found in favour of the consumer. This compared with 53% in the second half of 2010.

For retail banks, the conclusion of the PPI mis-selling case was undoubtedly the big issue for the first half of the year and profits will suffer from the very significant redress bill. Up until three years ago, PPI accounted for up to 25% of the profitability of some retail divisions which suggests that retail banking needs to find a new business model.

In light of constrained growth, cost control is likely to remain a key priority for banks as they struggle to grow top line revenues across many areas of their businesses and are faced with growing costs from regulation, which will require them to hold higher capital and liquidity, says KPMG’s UK Banks Performance Benchmarking Report.

See also -  Customer Engagement in Financial Services, Directors Forum 13th October, London