May 29, 2008 | posted by Pam Atherton in Banking, Credit Cards, Insurance, Investments, Loans, Mortgages, Pensions, Store Cards |

There has been a 30 per cent rise in the number of complaints made to the Financial Ombudsman Service (FOS), with a total of 123,089 formal complaints being made in the 2007-08 financial year.

The increase was attributed to a surge in complaints about bank charges (31,618) and payment protection insurance (PPI) generating 10,652 requests for compensation.

This  followed widespread publicity about banks being sued in the county courts over excessive overdraft charges and an OFT investigation into PPI mis-selling.  Other major sources of discontent were credit cards (41,123) and mortgage endowments (13,778).

But the FOS stopped dealing with overdraft charge complaints in July 2007, following an agreement between the banks and the Office of Fair Trading that all new cases should be stayed until legal issues surrounding the fairness of overdraft charges case were resolved in the High and Appeal Courts.

As a result, 14,000 bank charge complaints are pending at the FOS and are unlikely to be heard until late 2009.

As for PPI claims, Which? magazine says that as many as two million people may have been mis-sold PPI policies in the past five years, so if you think you have been mis-sold a policy you should contact your lender for a possible refund.

19 per cent of all complaints to the FOS came from claims handling businesses which handle complaints on behalf of consumers in return for a hefty chunk of any compensation achieved. The FOS said that, in some cases, complainants were not being represented properly.

The FOS report says: “In the specific context of pension related complaints involving Serps [the State Earnings Related Pension Scheme], we have seen a significant number of cases this year where some claims-management companies have given consumers unrealistic expectations of large sums of compensation in cash, without appearing first to have properly assessed the actual merits of the individual cases.”

David Cresswell, a spokesman for the FOS says that 80 per cent of PPI complaints to the FOS were upheld in favour of the consumer, compared to only 32 per cent for mortgage endowments. 

For current account and credit card complaints, 84 per cent and 79 per cent respectively were upheld in favour of the complainant, but in other areas, financial services firms’ and providers’ decisions were supported by the Ombudsman.