Record credit card complaints, but majority made by claim management firms – FOS

Complaints about credit cards hit a record high in the last three months of last year, says the Financial Ombudsman Service (FOS).

Between October and December consumers made 5,660 complaints about their credit cards – the highest level for a three-month period since the FOS started keeping records in the financial year 2014/15. The FOS, which aims to resolve disputes between consumers and their financial providers for free, said that 3,086 of these complaints were because people thought the lending by financial firms was unaffordable or irresponsible.

In the same three months the year before, there had been 3,216 credit card complaints, with 665 about irresponsible or unaffordable lending. Nearly three quarters of the credit card and unaffordable lending complaints in the new figures were made by professional representatives like claims management companies and law firms. This is up from a quarter of these complaints a year earlier.

The FOS said that many consumer complaints have shown that people think financial providers should have done more about persistently high credit balances, high credit limits or offered lower interest rates. Abby Thomas, the boss of the FOS said: “Given that many people are struggling in the current economic environment, it’s concerning to see such a significant rise in credit card complaints.”

She added: “Lenders have a duty to support their customers whatever their circumstances and are obliged to help people who are struggling with debt.” The ombudsman got almost 7,500 complaints about lending that seemed unfair or too much to pay back recently. Out of these, 70% were from professional helpers.

When the ombudsman resolved the disputes, they agreed with the claim management firms 14% of the time but with people who came to them directly 44% of the time. Viv Kelly, who works at the FOS looking after consumer credit, said: “The vast majority of unaffordable lending complaints are being brought by professional representatives.

“While professional representatives have an important role to play, we’re currently seeing some poorly evidenced complaints. Consumers don’t need to use a professional representative to bring a complaint to our service. People can come directly to our free, independent service and we’ll see if we can help resolve their complaint.”

In the last quarter of 2023, the ombudsman received a total of 47,868 new complaints across all categories. This is an increase from the same period in the previous year when it received 41,303 new cases. The top five most complained about products, aside from credit cards, were current accounts, hire purchase (motor), car/motorcycle insurance and buildings insurance. All of these saw an increase in complaints compared to the previous year.

Current accounts topped the list as the most complained about product with 7,804 complaints recorded in the latest period. The main reason for these complaints was fraud and scams, according to the ombudsman. Credit cards came in second place on the list of most complained about products.

Hire purchase (motor) was the third most complained about product, with 5,419 complaints in the most recent quarter. Around half of these complaints were about motor finance commission, the ombudsman said.

The Financial Conduct Authority (FCA) has announced a review of past motor finance commission arrangements and sales since the most recent complaints period. As part of this, it has put on hold a deadline for motor finance companies to give a final response to customer complaints about certain commission models.

It has also extended the time for customers to contact the ombudsman if the firms’ responses have not resolved their issues. Car and motorcycle insurance is the fourth most complained about product with 4,123 moans in the latest quarter. Buildings insurance, in fifth place, received 1,666 complaints.