‘I was not ill-informed and I believe the situation is unfair’: Financial watchdog rocked by record complaints … but thousands won’t get help
Britain’s banks and insurers are buckling under record complaints, many of which end up with the ultimate arbiter, the Financial Ombudsman Service. This organisation, the largest of its type in the world, is dealing with a record 400,000 new cases a year and fielding almost two million inquiries.
However, it cannot help in every case – as thousands of consumers are discovering.
Staff at the Ombudsman’s offices in London’s Docklands are tallying up the complaints for the year ending March 31.
Bank of Ireland loan rate rise exposes gap in protection
Figures published on Thursday showed a continuing surge in landlord mortgages, with 1.46 million now in force.
They account for more than one in ten of all mortgages.
Yet a regulatory quirk means that these loans fall outside mainstream regulation, and so disputes involving them are not likely to be covered by the Financial Ombudsman Service.
Caroline Grierson, 41, is among thousands of British-based landlords with a grievance against their lender, Bank of Ireland.
She has two buy-to-let mortgages with the bank from 2003. Last week her payments more than doubled when the bank increased its rate from 2.25 per cent to 4.99 per cent.
The rise comes even though the mortgages are trackers that are supposed to move in line with the Bank of England base rate, which has remained unchanged at 0.5 per cent since March 2009.
The controversial increase, which affects 13,500 borrowers, has been widely condemned. It rests on a clause buried within borrowers’ original contracts.
Bank of Ireland, which had to be bailed out in 2009, says it is raising the rate to ‘maintain greater levels of capital’ and claims it is entirely within its rights.
But Caroline, who lets four properties in the Connah’s Quay area of Flintshire, where she lives, is considering legal action. She believes the contract was unfairly written, an issue that usually the FOS could investigate. But because a landlord mortgage is involved, the FOS cannot act.
Caroline, who became a professional mortgage broker in 2008, says: ‘I was not an ill-informed landlord when I took out these loans, but the wording was very unclear – and I believe unfair.
‘The fact these loans are not regulated like other mortgages, offering the protection of the Ombudsman, is an anomaly. Such widely held financial arrangements should be covered.’
The FOS has not ruled out the possibility of being able to help in some Bank of Ireland cases.
Although it cannot intervene where the complaint involves advice on landlord loans, it says that it might be able to look at cases where borrowers dealt directly with the bank.
A spokesman for the FOS said: ‘If consumers are unsure whether they can make a complaint, they should speak to us – we may be able to help.’
The results, when they are published later this month, will show increases in the number of complaints across almost every facet of personal finance.
Cases involving payment protection insurance – the near-worthless cover sold on a vast scale by banks – account for three in four complaints and continue to soar.
But there are also steady increases in complaints about general banking, insurance, credit cards, overdrafts and savings accounts, among other services.
The FOS finds in favour of the consumer in approximately half of its cases, which usually means that compensation is paid by the firm responsible.
However, as the tide of complaints swells more people are discovering that there are cases where the FOS cannot help them.
And because of quirks in wider financial regulation, entire areas of finance, such as landlord mortgages, fall outside its remit.
Can you take your complaint to the Ombudsman? The Mail on Sunday sets out the answers.
ARE YOU WITHIN THE TIME LIMIT?
When something goes wrong you first need to complain to the bank, adviser or other regulated financial provider responsible.
They have eight weeks in which to resolve the complaint or issue a ‘deadlock’ letter in which they say they cannot agree with you.
This is the point at which you can approach the FOS. Generally your complaint needs to reach it within six months of receiving this deadlock letter. And, in total, your complaint should be made within six years of the event being complained of. Outside these limits, your complaint could be rejected.
IS YOUR CLAIM FOR TOO MUCH MONEY?
A firm can be ordered to compensate you up to £150,000. If your loss exceeds the limit, the FOS can order it to pay £150,000 and then recommend (it cannot force) the company to pay more as required. In practice, if the FOS thinks your case is likely to involve large sums, it will probably recommend that you take the dispute to court.
IS YOUR DEAL COVERED?
The FOS can look into cases involving regulated financial firms, which includes providers such as banks and insurers as well as intermediaries, such as financial advisers.
Some financial intermediaries and providers are not regulated. But if, for instance, a regulated adviser recommends an unregulated investment, the FOS could still be involved as far as the suitability of the advice was concerned. To be safely covered by the FOS, you should deal only with regulated intermediaries recommending regulated investments or policies.
IS YOUR CASE TOO COMPLEX?
The Ombudsman does handle complex cases, but sometimes it will encourage consumers to use the courts if, for instance, there are many parties involved or large sums at stake. Wrangles with firms where there are other disputes involved, such as the split of assets on divorce, might be better dealt with by courts. The FOS is free to consumers, making it preferable to the costs and risks of court proceedings. But if your case is not upheld by the FOS, you can still go to court.