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Complaints Handling Update

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management



1. Proposal to shorten complaint response waiting times

In July 2021, the Government published a consultation document on reforming competition and consumer policy . The consultation includes a proposal to shorten complaint waiting times in markets where alternative dispute resolution is mandatory. The consultation is now closed and responses are being analysed, but if taken forward, this could mean that firms would have four weeks (instead of eight) to deal a customer’s complaint before it will be referred to the Financial Ombudsman Services (“FOS”).

Whilst the Government recognises that firms should have sufficient time to resolve a dispute informally, it considers that a lengthy period cannot be justified in an era of social media and e-mail, and can harm firms and their customers if active steps are not taken to resolve a dispute. The proposals are therefore intended to incentivise firms to settle cases promptly and if not, customers can take complaints to FOS more quickly.

 The proposal is unlikely to be welcomed by firms, or indeed by the FOS, for a number of reasons: 

Failure to recognise increasing complexity: Our experience is that complaints are becoming increasingly complex (FOS recognises this too). A reduction in the final response deadline is likely to mean that many complaints cannot be dealt with properly by firms and result in even more complaints being referred to FOS. FOS has already seen a 60% (c90,000) increase in new non-PPI complaints in the last financial year and is desperately considering other measures (see update 2 below) to deal help deal with backlogs. Ironically one of those measures effectively gives firms more scope to informally resolve complaints. Although, the consultation acknowledges that there may need to be exceptions for particularly complex cases – where or how will the line be drawn on what is classed as a complex case? Will it be by value or complaint type? It’s difficult to apply a universal measure and may result in inconsistency in practice.

Does not address FOS waiting times: If the number of referrals to FOS increases, the result may be more consumer harm in the long-run because of the delays FOS is currently experiencing. FOS began this financial year with around 90,000 complaints waiting to be resolved. Once a complaint is received by FOS, it can take weeks (frequently months) for the complaint to be allocated to a casehandler and an initial assessment issued. It is a strategic priority for FOS to bring down waiting times and FOS is counting on firms to help it reduce its workload as it considers that many complaints come to it unnecessarily because they have not been more effectively dealt with by the business at source. The shortening of the final response deadline is unlikely to assist this strategic priority and instead may exacerbate issues further.

Increasing costs: If the number of referrals to FOS increase, so will the costs for firms . Ultimately the increased cost of complaint handling may be passed on to customers, indirectly, through higher prices for financial services.

Lessons learned during the COVID-19 pandemic: The extent of any disruption for individual firms, should the proposals be adopted, largely depends upon firms’ capacity to provide final responses within a four week window. For those firms that consider complaint about payment services or electronic money, they are already required to issue final responses within a fifteen day timescale. However, we anticipate that many firms will not welcome the introduction of a four week window, particularly as these proposals follow a period where many firms have struggled to issue final responses within the existing eight week time limit due to the COVID-19 pandemic. Whilst recent global circumstances have been exceptional and the FCA gave firms flexibility at the start of the pandemic, it soon expected normal service and firms to be dealing with complaints within the usual timescales. Extreme pressure would be put on firms if the deadline shortened and we had another highly disruptive event.

The outcome of the consultation is awaited but we understand FOS was intending to submit its own response. If the Government proceeds with the proposals, we anticipate that the FCA will consult separately on the proposed change given it will necessitate an amendment to DISP and this should include any transition arrangements.




2. FOS consultation on temporary changes to reporting the outcomes of proactively settled complaints 

As reported above, the COVID-19 pandemic has led to a substantial increase in referrals of complaints to FOS and has meant that FOS began the financial year with over 90,000 cases awaiting investigation. In a consultation published on 4 October 2021 , FOS has considered how it can move faster to resolve complaints and intends to:

• engage with businesses differently to move complaints along more quickly;

• free up investigators’ time by making use of other teams for straightforward tasks; and

• focus triage in areas such as in fraud and scams.

In addition, FOS is seeking views on whether a targeted intervention to temporarily amend its approach to publishing firm-specific outcome data could further assist in speeding up the resolution of complaints. FOS’s proposal would work as follows:

• FOS publishes biannual data on individual firms which includes the percentage of resolved complaints where it finds in favour of the customer, known as the ‘uphold rate’ or ‘change in outcome rate’ . A ‘change in outcome’ case is one where FOS has resolved the complaint by making a more favourable outcome for the customer. Complaints are recorded as having had ‘no change in outcome’ if FOS finds that the firm has done nothing wrong, or if it agrees that the outcome proposed by the firm was fair. The ‘uphold rate’ reflects the percentage of complaints resolved as a ‘change in outcome’.

• FOS is keen for firms to resolve complaints quickly and without the need for individual investigations (where appropriate). However, it has found that due to the way it records outcomes, firms are reluctant to resolve complaints informally due to potential negative connotations of a higher recorded uphold rate if FOS then disagrees with their outcome. Firms place a strong emphasis on uphold rates which are often an important benchmark individually and across the industry.

• To overcome this, FOS proposes to create a separate category for a defined group of complaints already referred to FOS. For a restricted period and until 31 March 2022, if a firm settles the complaint before FOS has issued its opinion, it would not be recorded as having either a change in outcome or no change in outcome. Instead it would be reported as a separate category when FOS publishes business-specific data.

• FOS will still communicate offers to customers once they are received from the firm but it will be careful to make clear that it has not assessed the case and so cannot endorse any offer.

• If the customer declines the offer or the firm decides not to make an offer at all, FOS would investigate the case and record the outcome as usual.

• Full case fees continue to apply.


The consultation does not distinguish whether a specific type of complaint will be ring-fenced. In the absence of clarity, we assume that all complaints received and not resolved by FOS by a cut-off date (to be confirmed) will be segregated. Further information is due after the outcome of the consultation, but FOS has made it clear that firms will be encouraged to first make decisions on cases involving vulnerable customers to ensure such cases are prioritised.

We consider that the proposal is unlikely to be supported by firms for a number of reasons:

The proposal will only cause more delay and harm: Once a complaint has been referred to FOS, in most cases, firms have already provided a final response and considered their position in detail. If a firm has decided not to settle the case for good reason, what difference will it make if FOS then provides the firm with further time to settle the case informally? The firm is unlikely to change its decision and the complaint will likely still need investigation by FOS. The process will become even more protracted and further harm caused to the customer.

The incentive isn’t that attractive: There are lots of facts behind a firm’s decision to settle a complaint – is the fear of the uphold rate really the key barrier to firms settling cases or are there other better incentives that FOS could adopt?

FOS (not firms) is the root cause of the problem: Putting aside the unexpected impact of the pandemic, FOS still had a backlog of complaints before this and the industry would argue that the issue it now faces is of its own making due to: (1) its lack of resources, (2) its lack of efficiencies, (3) the wide scope of the complaints FOS now handles (including value), (4) its own liberal approach on time-bar and the lack of any long-stop on complaints means that it is considering complaint regarding historic issues, and (5) the lack of any penalty for CMCs driving the mass referral of complaints to FOS without good reason. To put the onus back on firms does not deal with the root cause of the issue and merely plasters over the cracks temporarily.

Failure to be flexible around case fees: There is arguably no justification for FOS to charge the full case fee if the case is settled informally by the firm and without investigation by FOS. Many firms will be disappointed that FOS did not propose to waive the case fee for such cases.

Responses to the consultation are due on 18 October and FOS then intends to publish its next steps and implement plans by 1 November 2021. It will be interesting to see what this proposal, which will surely be implemented, will actually achieve in practice.


3. Quarterly FOS Complaints data for 2020/21 recently published

FOS has recently published its quarterly complaints data for April to June 2021 . We set out the key headlines below:

• The total number of complaints received in the first three months of 2021/22 dropped by just over a third compared to the last three months of 2020/21. This is in line with FOS’s forecast.

• The number of fraud and scams complaints has increased by 66%, compared with the same period last year. Complaints include fraudsters posing as the customer’s bank and convincing them to transfer money to a ‘safe account’, customers paying for goods via bank transfers but are never received and frauds/scams involving cryptocurrencies. Although cryptocurrencies are unregulated investments, FOS is able to look into complaints about banking providers who refuse to reimburse consumers who feel they’ve been a victim of a cryptocurrency fraud of scam. The uphold rate for total fraud and scams in complaints was 60%, compared with 50% the previous years.

• FOS’s experience of an increase in fraud and scams accords with the picture seen by UK Finance which recently reported that fraud is now at a level where it poses a national security threat .

• Current accounts became the most complained about product for the first time in over a decade (an increase by 55% compared with the same period last year). Complaints about credit cards and car insurance also had high numbers of complaints.

• Despite heightened levels of complaints about historic unaffordable lending in 2020/21, FOS has taken on fewer new cases. In particular, complaints about guarantor loans and home credit have declined following announcements from two of the biggest firms that they were applying for schemes of arrangement . Uphold rates on unaffordable lending remains high, with complaints about logbook loans having the highest uphold rate at 71%.

• FOS has seen a decline in complaints about products directly relating to the COVID-19 pandemic. For example, business interruption complaints have decreased following the Supreme Court judgment in January 2021 which provided clarity on policy wording relevant to some complaints . Further, complaints about the Bounce Back Loan Scheme have also fallen, as many received previously related to lending decisions from banks in the early stages of the pandemic.

• New complaints about travel insurance fell by 59% between Q4 2020/21 and Q1 2021/22. Complaints could rise again if further restrictions on travel are implemented.

• FOS expects complaints arising from the impact of COVID-19 on people’s financial lives to continue.

• Complaints about how CMCs have handled PPI claims remains the most complained about CMC activity.

Firms may find it useful to review the complaints data to assess it against their own complaints and to help predict future areas for complaints and/or litigation. Whilst the disruption caused by the COVID-19 pandemic is starting to subside, its effects will long be felt as a result of the new causes of harm being caused to customers, particularly fraud and scams involving cryptocurrencies. FOS recently reported that anecdotal evidence suggests the increase in complaints about cryptocurrency complaints could be in part driven by social media-based scams, with young people wanting to make extra cash while furloughed, while others were simply spending more time on social media .


4. Independent review into FOS

Recently, the FOS Board commissioned an independent external review of FOS’s service. The review is something the FOS Board undertakes periodically. The last review was in 2018 following concern that some of its staff were not behaving appropriately and fulfilling the organisation’s legal duty as they should (much of which was documented in the Channel 4 Dispatches programme in March 2018) . The current review is focussed on ensuring that FOS can continue to meet the needs of its customers and is split into two parts:

1. Looking at the current operational effectiveness of the service – involving an evaluation against FOS’s performance and efficiency against its objectives; and

2. Considering the key changes in the external landscape and how FOS must adapt to meet current and future challenges.


We understand that an independent management consultancy firm (Oaklin) has been engaged to carry out the review and will reach out to a range of stakeholders. The results of the review are due to be published in Autumn 2021.

Please get in touch if you would like to discuss any of the issues raised in this briefing.



[1] Reforming competition and consumer policy

[2]The individual case fee now being £750.

[3]See here.

[4]This data covers businesses that have had at least 30 new cases and 30 resolved cases in the six month reporting period.

[5]FOS quarterly complaints data Q1 2021/22

[6]UK Finance Update.

[7]Amigo Loans Limited and Provident Personal Credit Limited. See our briefing on the Amigo Loans Scheme of Arrangement here.

[8]See our briefing here for further information.

[9]See FOS update here.

[10]In summary, the last review found that FOS provides an effective and essential service and that it was not institutionally biased against consumers, but that it must work hard to continuously improve the service it provides.