Credit disputes increase by 34%

Complaints to the Financial Ombudsman Service – the independent organisation that settles disputes between consumers and financial companies – has reached record levels, with 127,471 new complaints and 789,877 consumer enquiries in 2008/9.

The report revealed that consumer complaints were upheld in the majority of cases, with 113,949 disputes resolved, resulting in compensation for consumers in 57% of cases.

The number of complaints about mortgages, credit cards and consumer credit rose by 34% but complaints about mortgage endowments fell by more than half. Insurance disputes, including those relating to motor, household and travel insurance, increased by 84%, but complaints about health insurance levelled off. The report also revealed a three-fold increase in complaints about payment protection insurance (PPI).

While half of the total number of disputes related to six of the UK’s largest financial services only 5% of those businesses covered by the ombudsman service had a complaint referred to the service in 2008/9.

Sir Christopher Kelly, chairman of the ombudsman service, said:

“The financial world is a very different place now from a year ago – and the ombudsman, like everyone else, has been affected by the economic turmoil. For us it has involved dealing with a significant increase in the number of complaints arising from the impact of the worsening financial climate. As businesses tighten their belts – and the credit crunch leads to increased financial difficulty for many consumers – we are gearing up to deal with further volatility in complaint volumes.”