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It’s the putting right that counts in dispute resolution

3 min read

It’s been 15 years since financial services providers had to have an avenue for their customers to air any gripes, and while complaints are at historically high levels, the disputes resolution providers are cementing their place in the firmament.

Financial Services Complaints Ltd – one of the four approved schemes – received 1,469 complaints in the June year, up from 1,426 a year earlier and twice the amount five years ago.

Lenders typically account for the largest share of complaints, making up 38% in the latest year, although financial advisers attracted the highest number of formal investigations, accounting for 23% of the 366 cases opened.

“We’re not yet seeing signs of complaints reducing since increasing rapidly two years ago in the wake of covid-19,” Financial Ombudsman Susan Taylor said in a statement. “What’s changed is the spread. Complaints are now more evenly distributed across a broader range of financial services, rather than being concentrated in just a few areas like non-bank lenders.”

The update in complaints numbers comes after FSCL got the stamp of approval in its five-yearly independent review ensuring the scheme meets its criteria of fairness, accessibility, effectiveness, independence, accountability and efficiency.

Getting the message out there

The latest review, undertaken by Advertising Standards Authority appeal board chair Nanette Moreau Hammond, found the scheme strongly aligned with its six principles, making a few recommendations and highlighting its main concern around getting consumers aware that the services exist.

“Awareness is the greatest challenge for virtually all external dispute resolution schemes, and it is true in the financial services sector, not aided by the confusion caused by having four schemes,” Moreau Hammond said in her review. “The difficulty is there is no easy way to ensure consumers are aware they can even raise a dispute, much less where to go.”

In an interview before the annual stats were released, FSCL’s Taylor said raising the profile of the schemes among consumers is a key focus for the next 12 months, with educating people about the financial services they use a growing part of disputes resolution services.

Taylor said a lot of financial advisers entered the new regime 15 years ago with trepidation but have since appreciated the worth of the schemes providing a route for unhappy customers to complain and for decisions by the schemes to offer guidance to the wider sector.

“An important part of our role is letting people know where people get into trouble and providing tips for avoiding complaints,” she said.

Taylor points to FSCL’s decisions around clawback fees – where an adviser repays commission received from a lender and passes on the cost to a customer – as an area where the scheme has made things easier for consumers.

“That’s where the schemes are able to add value – we can make sure consumers understand things,” she said.

By the numbers

FSCL has 9,355 members, of which 8,470 are advisers. It covers 392 lenders, 267 transaction service providers, 16 insurers, 149 fund managers, 31 securities issuers, 12 crowd funders, 13 charities, and five corporate trustees.

The Financial Dispute Resolution Service has 1,152 members, of which 718 are advisers and brokers, 208 are financial service providers, 205 are lenders, 13 are FX trading platforms, six are insurers and two are crowd funders and peer-to-peer lenders.

And the Insurance and Financial Services Ombudsman – which looked at merging with FSCL – had 3,636 members, of which 47 are insurers, 1,447 are financial adviser, 507 are financial advice providers and 1,635 are other financial service providers.

FSCL’s Taylor said it’s not just regulated advisers and providers that use the scheme’s services, with some firms making unregulated wholesale offers to eligible investors also using the scheme to settle customer disputes.

And when the rubber hits the road, FSCL – like the other dispute resolution services – works to find a way through things in a swift way, rather than the slow and costly experience of going to court.

“We’re trying to come up with solutions,” Taylor said.

Reporting by Paul McBeth. Image from Headway on Unsplash.