Consumer credit complaints have overtaken travel insurance complaints over the past year, reports Financial Services Complaints Limited (FSCL), a financial ombudsman service, in its latest annual report.
Commenting on the release of their annual report today, “The increase in complaints reflects challenges in the wider economic environment,” says Ombudsman and CEO, Susan Taylor, adding that, as history has shown with the global financial crisis of 2008, an economic downturn inevitably means an increase in complaints.
“In times of economic turmoil with consumers facing increasing pressures and rising costs, it is more important than ever to maintain consumer confidence in financial markets.”
“Access to effective dispute resolution plays a crucial role in maintaining consumer trust and confidence in the financial organizations and advisors with whom they regularly interact.”
“Consistent with trends we saw last year, in 2022 there was a 15% increase in complaints with 1,077 received, compared to 931 in 2021,” says Ms Taylor.
Of the 214 cases formally investigated, the largest proportion of complaints related to consumer credit products at 29%, followed by mortgages at 10% and credit cards at 9%.
A consumer credit case study in the annual report shows how a lender was able to work with a consumer who found themselves in financial difficulty due to the impact of Covid-19 and an abusive relationship.
Kate found herself unable to pay a debt consolidation loan after her working hours were reduced following the 2020 Covid-19 lockdown. Her estranged husband also forced her into more debt .
After contacting a financial mentor for help with her finances, the financial mentor raised concerns that the lender had breached its responsible lending obligations by underestimating Kate’s food expenses in her budget when it first approved the loan.
FSCL noted that Kate had honored all loan repayments until Covid-19 intervened and that debt consolidation had improved her financial situation. Other factors, such as Covid-19 and the abusive relationship, were determined to be the main causes of Kate’s current financial difficulties.
Ultimately, the lender agreed to accept repayments of $300 per month until November 2022, when the lender would then reassess Kate’s financial situation, with a view to increasing the repayment amount.
“We recognize that hardship claims can be difficult, particularly where a lender believes the borrower has made the situation worse by taking on new debt,” Ms Taylor says.
“However, when assessing a hardship request, a lender must take the borrower as they find themselves and work with the borrower to find a lasting and workable solution. We were pleased to see a lender ask for all the necessary information and do a solid assessment before offering a solution combining both a reduced interest rate and a repayment amount that made paying off the loan affordable for Kate.
It was a great year for the FSCL, which obtained the right to use the title of ombudsman.
“The title carries considerable mana and, in my view, recognizes the work done by FSCL in providing a world-class dispute resolution service,” Ms. Taylor said, adding that since FSCL meets all the criteria for an ombudsman, including the principles of fairness, independence, accessibility, accountability and effectiveness. “It was important that the name of FSCL accurately reflected the role the organization plays, thereby improving confidence in the service of FSCL.”
You can access the annual report here.
© Scoop Media