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The high street of shame

This week, I had intended to pen a quick review of Peter Hargreaves’ new book, In for a Penny.

After all, its blurb – “a candid and outspoken book” – makes it sound much more exciting than Dan Brown’s latest, and in my past experience, completely unreadable rubbish. Moreover, I like the idea of Peter giving “his forthright views on what it takes to be successful as an entrepreneur.”

Unfortunately, a minor cock-up by an Amazon supplier meant the book did not arrive before a planned trip to Northern Ireland, so it will have to be next week.

Meanwhile, last week’s decision by the Financial Ombudsman Service to publicise the names of financial institutions with the biggest number of complaints about them is interesting.

The assumption clearly seems to be that the act of naming and shaming banks and insurers in this way will lead to them upping their game and treating their customers more fairly.

I doubt that it will make any difference at all. The starting point is that the complaints themselves are only those made in the first six months of this year. In effect, we are being given a snapshot, there is no continuity, no sense of history in terms of understanding what has happened in the past.

Not surprisingly, the top five high-street banks – Lloyds Banking Group, Barclays, RBS-Natwest, Abbey and HSBC – accounted for more than half the complaints.

Out of almost 70,000 complaints received by the FOS in the first half of this year, the top five high-street banks each had more than 3,000 complaints against them, with Barclays accounting for the most with 8,283. Together, they accounted for 38,000 complaints.

Taking into account separate brands owned by the individual bank, such as Halifax, Bank of Scotland, Cheltenham & Gloucester and numerous insurers such as Scottish Widows and Clerical & Medical, the wider Lloyds Banking Group had 15,233 complaints that went to the ombudsman – 22 per cent of the total.

Yes, IFAs and insurers feature on the list, but way down. Sesame received 144 complaints while Phoenix Life received 508 and Windsor Life 164. Elsewhere, St James’s Place Wealth Management is listed, as are Aviva, Axa, Friends Provident, Legal & General, Liverpool Victoria, Scottish Widows and Zurich.

There is another important element of the puzzle – the number of complaints upheld by the FOS.

Regarding bank accounts and loans, an average of 61 per cent of complaints were upheld, led by CitiFinancial and Capital One. HSBC (59 per cent), Lloyds (54 per cent), NatWest (54 per cent), and RBS (55 per cent) were slightly below that average. Barclays had a staggering 71 per cent upheld against it.

The typical average of complaints upheld against financial firms tends to be closer to 40 per cent, so that gives some idea of how bad the banks in particular appear to be behaving – in the FOS’s mind at least.

Bear in mind also that before a punter comes to the FOS, they are required to go through a rigmarole that first involves complaining to the bank itself and trying to reach settlement that way. When all hope of reaching a resolution through the bank’s internal dispute procedure are exhausted, the complainant needs to obtain a letter from an institution saying the matter must now be dealt with by the ombudsman.

So only the most determined complainants, whose cases have already been rejected by the institutions, have their cases heard by the FOS.

What this means is that banks are rejecting many tens of thousands of complaints about them and their subsidiaries, even though they know that, on strong balance of probabilities, they will lose when the matter goes to the FOS.

Now, the banks will argue there are various ways of looking at this data. The first is that, given the fact that the vast majority of the UK adult population has a bank account with one of the high-street banks, the high number of complaints about them is simply relative to their size.

It is also the case that a massive number of complaints involve sales of PPI cover, which will typically be regarded as one-off and not representative, therefore.

So to go back to the original question, will it change the institutions’ behaviour? My guess is it won’t. After all, this is all about making or losing money – lots and lots of it.

They will happily trade one day’s negative publicity every few months in the knowledge that they are all as bad as each other – and therefore there is nothing for customers to choose between them. Meanwhile, hundreds of millions of pounds made through unfair charges and missold financial products will continue to flow into their coffers.

There’s one word for it – shameless. And nothing the FOS does will stop it – unless the publication of such data is matched by a parallel move from the FSA to investigate firms with either high numbers of complaints against them, set against some sort of baseline, or where the ombudsman upholds more than a given percentage of those complaints.

Except of course, that if the Tories win the next general election, they will abolish the FSA in its current form. Oh well, scare over.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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