70% rise in complaints about financial products recorded by ombudsman

New data from the Financial Ombudsman shows a fourfold jump in financial complaints about credit cards and car finance

Complaints about financial products jumped by around 70% between April and June, compared with the same period last year, according to the Financial Ombudsman Service.

Consumers raised 74,645 cases with the complaints resolution service about financial products between 1 April and 30 June this year, compared with 43,953 complaints reported in the same period last year.

Complaints about credit cards and motor hire purchase saw a fourfold increase – with most of these concerning with irresponsible and unaffordable lending. 

Tim Hogg, director at Fairer Finance, the consumer research and ratings group, said:

‘Given that interest rates on credit cards have risen over the last few years, it is not surprising that FOS complaints about unaffordable lending have risen.

‘Our polling of the credit card market shows that levels of customer trust and happiness stand below where they were in 2021.’

The Ombudsman said it continues to uphold 37% of the complaints it reviews. But warned – after seeing a surge in complaints from claims management companies and no-win, no-fee law firms – that using professional representatives to escalate complaints does not always lead to better results for consumers.

Abby Thomas, Chief Executive and Chief Ombudsman of the Financial Ombudsman Service, said: ‘Whilst professional representatives have an important role to play, they must ensure that their cases are well evidenced and have merit.’

Most complained about products

A breakdown of the most complained about financial products received by the ombudsman in April to June this year, compared to the same period last year.

Financial product	April-June 2024	April-June 2023
Credit cards	18,175	4,189
Hire purchase (motor)1	15,925	3,678
Current accounts	8,698	7,224
Car/motorcycle insurance	3,940	3,869
Conditional sale (motor)1	2,585	1,776

¹ Hire purchase and a conditional sale are both forms of car finance.

Credit cards most complained about financial product

Credit cards were the most complained-about product in the first three months of this financial year, receiving 18,175 complaints.

The vast majority of these complaints – 15,580 – were about perceived irresponsible and unaffordable lending. Of this figure, more than half were brought by professional representatives.

Chief Ombudsman Thomas added: ‘It’s concerning that we’re continuing to see large volumes of complaints, particularly considering the cost-of-living crisis.

‘It’s vital that businesses are open and transparent with their customers, treating them with fairness and understanding.’  

Hogg added: ‘Some consumers do not get the best out of their credit card – partly due to the complexity of the product design and fee structure. There are many scenarios in which customers could feel ‘caught out’ by their credit card.’

Jump in car finance commission complaints

Hire purchase (motor) was the second most complained-about product, with 15,925 complaints, of which around three-quarters relate to motor finance commission. More than 90% of the motor finance commission complaints were brought by professional representatives.

The Financial Conduct Authority is currently investigating whether car finance firms owe compensation to millions of consumers who financed their car under ‘discretionary commission arrangements.’

While it waits for the outcome of this investigation, the ombudsman has said it will continue to investigate the complaints that come to its service and are not captured by the regulator’s investigation.

Half of complaints now coming from professional representatives

Professional representatives – who tend to take a cut of any compensation payout – now account for around half of the complaints received by the ombudsman. This compares to just 17% in the same period last year.

The service said that, in the first quarter of this financial year, 25% of claims brought by professional representatives were upheld, compared with 40% of those brought directly by consumers.

Most complaint issues brought by professional representatives relate to either irresponsible and unaffordable lending or motor finance, the service said.

The ombudsman has been consulting on a proposed case fee for professional representatives and will give an update in the coming months.

Hogg said: ‘It’s important for consumers to remember that they can take their complaint to the FOS directly without paying a fee.

‘Professional representatives such as claims management companies typically charge consumers a fee for managing successful FOS complaints.

‘So consumers should consider whether using a professional representative is worth the cost.’

Our guide to using claims management companies also covers the free alternatives you can use when complaining that ensure you keep all your compensation.