Bank complaints set to hit record

The number of consumer complaints about banks and other financial companies is expected to reach record levels this year as the credit crisis puts pressure on household and business budgets.

The Financial Ombudsman Service, which settles disputes between consumers and their firms, is preparing to hear an extra 50,000 disputes in the 2009-10 financial year, a 44 per cent rise on current levels,taking its overall workload up to a record 165,000 cases.

The largest rise in complaints is expected to come from borrowers unhappy with their mortgage lender, with new disputes forecast to jump by 78 per cent to 16,000,with many cases relating to “affordability and financial difficulty”.

“We are expecting that with both consumers and financial firms looking closer at their finances, the types of dispute that have in the past have been settled at an early stage – or before they reached the Ombudsman service – may now be more entrenched,” said a spokesperson for the Ombudsman’s service.

The Ombudsman’s service set out projections for its workload in its proposed budget for the 2009-10 financial year, published on Thursday.

The service sees its operating costs jumping 48 per cent from £62m this financial year to £92m ($134m) in 2009-10, as it takes on an extra 300 adjudicators to cope with the substantial rise in caseload.

Sales and advice issues are expecting to be at the heart of many new complaints, said the Ombudsman, with pension and investment disputes forecast to jump by 41 per cent, and current account complaints up a third in 2009-10.

The Ombudsman is also forecasting a 57 per cent rise in complaints about motor and household insurance claims.

“In times of economic downturn, generally more insurance claims – and indeed complaints – are made as consumers who might in better times not have followed up on more modest claims decide to pursue matters further,” said a spokesperson for the Ombudsman’s office.

“At the same time, we are also starting to see signs that some insurers may not be so willing to settle complaints on a good will basis and will argue more vociferously why a claim should not be paid in full or at all.”

In working out its projections for 2009-10, the Ombudsman took into account the economic climate, forecasts from the financial services industry and current complaint levels at larger firms.