Complaints about financial institutions soar as 'services' part of 'financial services' falls by wayside

Here’s our proposition: you give us your money. We make a bunch of money from it, so our top employees and investors get rich. And when you need us, we flip you off. OK?

At this point you’re probably wondering what on earth I’m talking about. How could any business hawking that hope to survive? Well, last time I looked the ragbag of businesses operating under the heading “Financial Services” (surely a misnomer that) they were largely doing very well for themselves out of the above business model.

Take five minutes to run the slide rule over the latest complaints data published by the Financial Ombudsman Service and you’ll see that my opening paragraph was hardly an exaggeration.

The number of new cases received by the service leapt by 13 per cent to 170,000 in the first six months of the year. Chief executive Caroline Wayman said that “most types of financial product” saw an increase in numbers.

In other words, the surge is not just down to the publicity given to the longstanding bugbear of payment protection insurance mis-selling, which is getting a lot of extra attention thanks to a campaign launched on the back of the Financial Conduct Authority caving into the banks and agreeing to draw a veil over the affair in a couple of years.

Current accounts, credit cards, loans, other types of insurance, they’re all in there, and more besides.

It’s worth noting, at this point, that consumers can only approach the Ombudsman after first exhausting the in-house complaints procedures of the company they’re dealing with.

Interestingly, I’m told by the service that the overall rate of complaints being upheld has fallen a bit, to just over a third (36 per cent).

In a rare welcome development, financial institutions are getting better at resolving customer issues themselves. But that’s very necessary because they’re generating a lot more of them.

The “Services” part of “Financial Services” is still a huge problem, something noted by the Ombudsman. The industry obsesses about outsourcing, cost cutting, technology, automation, and it invests money in these areas. And yet its approach badly letting down its customers, whose interests too often appear to get lost.

What it really needs to do is ensure its products do what they say they will do. That seems to get forgotten about once the customer’s money is in.

Even switching won’t necessarily help them. They might find a better deal, but they probably won’t be able to find better service. Treating customers shabbily seems to be endemic to the industry.

All this costs money, and quite a lot of it. Complaints are expensive and time consuming to resolve. If they arrive at the Ombudsman’s door, they cost still more. Yet the industry’s bosses seem to prefer mouthing platitudes and pretty words instead of taking action to address their issues.

That’s true even though they could save themselves a lot of money. Sadly, cost cutting by improvement appears not to be on their agenda. Too much hassle. Too radical a notion. Let’s just axe a few more jobs to keep the City sweet.

With the free market in financial services so obviously failing the consumer it ought to be on the Financial Conduct Authority to knock some heads together. But it seems preoccupied with its PPI ads starring Arnold Schwarzenegger. Get your complaints soon or it’s hasta la vista, baby. You won’t be able to complain!

It looks like there’ll be no shortage of work for the Ombudsman’s case workers when that one’s been brushed under the carpet.