Banking complaints hit 'highest level in decade' as fraud and credit issues surge

Complaints against the banking sector have rocketed to the highest level in at least a decade, according to the Financial Ombudsman Service (FOS). A staggering 80,137 new cases focusing on banking and payment products were reported to the FOS during the financial year 2023/24.

This surge represents an alarming jump from the previous year's total of 61,995 complaints lodged in 2022/23. Concerns about current accounts and credit cards and worries about frauds and scams were behind the increase, the service said.

Administrative failings and customer service shortcomings, along with concerns over what some perceive as unaffordable or irresponsible lending practices by banks, are at the forefront of these burgeoning complaint themes. Leading the charge, current accounts became the hotbed of consumer dissatisfaction with 30,635 recorded complaints.

Additionally, there were 24,402 complaints surrounding credit cards, with 13,584 based on perceived reckless or unsustainable lending practices. Comparatively, the previous year saw 14,504 grievances related to credit concerns, with 3,723 pinpointing this particular issue.

Fraud and scam cases generated 27,312 complaints in 2023/24, around half being around authorised push payment (APP) scams, where someone is tricked into sending money online to a fraudster posing as a genuine payee.

A UK Finance spokesperson said: "The financial services sector takes complaints seriously. Where things go wrong firms will always look to put it right and provide good outcomes for customers."

The spokesman also underlined that credit card companies and lenders are bound by stringent regulations intended to evaluate the affordability of lending, aside from offering various forms of assistance to those concerned about their financial well-being or repayment obligations.

They added: "Meanwhile, the financial services industry prevents over £1billion of fraud taking place every year, and is currently the only sector which reimburses victims."

The ombudsman revealed a sharp increase in cases, with 198,798 new complaints for 2023/24, up from 165,149 in the previous year.

Trends indicate that this rise is set to continue in the ongoing financial year, the service added.

According to the service, while the method of categorising complaints has evolved, current figures suggest banking complaints for 2023/24 are at their highest in over ten years.

Abby Thomas, the chief executive and chief ombudsman at the Financial Ombudsman Service (FOS), commented: "It's always concerning when you see cases rise so significantly, particularly when so many people are struggling in the current economic climate."

"Whether someone is the victim of a fraud, struggling with credit card debt, or having issues with their overdraft, they deserve support and understanding from their financial provider. It is imperative that all businesses treat their customers fairly and in a timely manner."

"If consumers don't feel they've been treated fairly, they should contact our free, independent service and we'll investigate their complaint."

The service also noted an uptick in complaints filed through claims management companies (CMCs) and professional representatives across all categories.

These intermediaries were responsible for a quarter (25 percent) of complaints in 2023/24, a noticeable increase from less than a fifth (18 percent) in the previous year.

The Financial Ombudsman Service (FOS) has noted both commendable and questionable practices by professional representatives. It expressed concerns about mass claims submitted by some representatives, and others failing to respond to requests for evidence, which slows down investigations.

When complaints are upheld, professional representatives can take a portion of the redress awarded to their clients. However, consumers have the option to take their case directly to the FOS and keep all the compensation.

In recent months, the service has been considering a proposed case fee for professional representatives, aiming to make the fee model "fairer". Professional representatives could be charged up to £250 to bring a case, reduced to £75 if the outcome is determined in favour of the consumer.

James Dipple-Johnstone, deputy chief ombudsman at the FOS, said: "A quarter of all cases coming to the ombudsman were brought by professional representatives in the last financial year. While they have an important role to play in resolving financial disputes, they can also gain financially from our service without contributing to the running costs. There is sometimes little evidence of due diligence by some representatives to ensure claims they advance have merit."

"We are committed to making our service as accessible as possible while ensuring it remains free for all customers and that those with upheld complaints can keep all of any reward we make."

"Our proposed charges aim to ensure we cover the costs associated with resolving disputes while reflecting a fairer allocation of those costs."

In terms of all financial products, the FOS upheld 37 percent of the complaints it resolved, marking a slight increase from the 35 percent recorded in 2022/23.

Rocio Concha, Which? director of policy and advocacy, commented: "These damning figures show how consumers are being badly let down by their banks in important everyday areas including credit cards, current accounts and insurance."

"It is particularly concerning to see such an increase in the number of complaints about fraud. This underlines the importance of new rules due to come into force soon that will make it mandatory for the vast majority of scam victims to be reimbursed and treated more fairly and consistently."