It was not long after the coronavirus first hit that consumers began sending pleas for help to the Financial Ombudsman Service (FOS), concerned at the way the finance industry was reacting to Covid-19.
“It was inquiries rather than full-blown complaints at first,” says the chief ombudsman, Caroline Wayman. “We were seeing things that we just wouldn’t have thought about, linked to not being able to do things in a physical world.”
Customers who came to the end of car finance agreements were finding there was no one to come to inspect the car, so they could not give it back. People who needed to use bank branches were struggling to be served. “We saw quite a lot of issues as the practicalities were being worked through,” she says.
The FOS is the official body charged with dealing with consumers’ complaints about financial firms and it can order them to reverse decisions if they are found to be in breach of their own rules or other codes.
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So far, few of the Covid-related cases have got this far, but the service has been giving advice to consumers and companies, and making it clear when it thinks a bank or insurance firm should be paying up. On Monday it will publish complaints data for July to the end of September, and say that of the 69,000 cases it has taken on, one in 12 cases were related to the pandemic. It has so far received more than 10,000 complaints linked to the crisis.
Speaking by phone from her home in south London, Wayman says that the organisation, like many others, had to turn itself into a homeworking operation almost overnight. “If pre-pandemic you had been thinking what would it take, and how long would it take to do, you would have been making charts and you’d think it would take you months. And actually we managed to do so in the space of a few days.”
Wayman says since March the service has seen a “significant increase” in complaints about travel insurance and credit card section 75 rules – “people trying to claim through their credit card … that’s not just holidays, that’s all sorts of other goods.” Wedding insurance, although not a massive part of the ombudsman’s caseload, has also attracted increased complaints.
Insurers trying to wriggle out of pay-outs is not a new thing, and Wayman says the service has “had a long-held position around holidays being effectively curtailed” if things have gone wrong while someone was abroad.
“In normal times, the example I’d give you would be someone who maybe injured their back on day one,” she says. “Although they can’t come home, because they are too injured, they literally can’t do anything.” Insurers who have argued that this scenario does not trigger a payment for a curtailed holiday have been told to pay out. “There are some situations we’ve seen in the pandemic that are analogous to that where you’d say: ‘Well, look, come on, they were locked in their hotel room, there’s nothing they could do.’”
Before the pandemic, the FOS was already getting a lot of complaints about consumer credit providers, and with household budgets squeezed it is perhaps no surprise these have continued to flow in. Many relate to high-cost credit: payday and short-term instalment loans, and, in particular, guarantor loans where a family member or friend has signed up to back the borrower. The number of complaints about these loans grew by almost 300% in the summer, and last year it found in favour of consumers in 90% of cases.
“There is clearly need for improvement there,” says Wayman.
Consumers have also been getting in touch about buy-now-pay-later schemes, and Wayman says they have about 150 inquiries from people who want help. However, the new generation of these providers is not covered by the service, and she says all it can do is signpost debt-support services if people are struggling.
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When the last financial crisis hit, payday lenders grew out of consumers’ need for cash at a time of low wages and banks’ lack of appetite to lend. Wayman says the constantly evolving credit market creates challenges for the service, especially given that some of the legislation governing it dates back to the 1970s.
The financial regulator’s decision to force lenders to offer payment holidays has kept people from the ombudsman’s door so far, but the service is keeping an eye on complaints.
“We stand ready to help people who do have concerns,” she says. “But it would be good to try and get ahead of that wherever possible and help people to transition out of those arrangements. That’s not for us to do, but where we can contribute is being able to share insight from what we see in our cases and the things that can go wrong.”