According to the Financial Ombudsman Service (FOS), credit card-related complaints reached an all-time high in the last three months of last year.
Consumers filed 5,660 complaints about their credit cards between October 1, 2023 and December 31, 2023. This is the highest level for the service in three months. Comparable data dates back to the first quarter of the 2014/15 financial year.
The organization, which acts as a free resolution service for consumers and financial providers, said 3,086 of these complaints were due to unaffordable or irresponsible loans by financial companies.
In the same period a year ago, 3,216 credit card complaints were filed, 665 of which were about irresponsible or unaffordable loans.
It is worrisome to see such a rapid increase in credit card-related complaints at a time when many people are experiencing difficulties in the recent economic situation.
Abby Thomas, Financial Ombudsman Service
Almost three-quarters of the credit card and unaffordable loan complaints highlighted in the new figures were made by professional representatives such as claims management companies and law firms, up from four of these complaints a year ago. This is an increase compared to 1 in 1.
The FOS said consumer complaints in particular suggest that people believe financial institutions must consistently offer high credit balances, high credit limits or lower interest rates.
Abby Thomas, CEO and Chief Ombudsman at FOS, said: “It is concerning to see such a significant increase in credit card complaints at a time when so many people are struggling in the current economic climate.
“Obtaining significant amounts of debt can be stressful and it is important that financial service providers treat consumers fairly and transparently.
“Lenders have a duty to support their customers regardless of their circumstances and a duty to help those struggling with debt.”
Although the role of professional representation is important, we are currently receiving some complaints that are unfounded.
Viv Kelly from FOS
Across a range of financial products, the Ombudsman received nearly 7,500 complaints about irresponsible and unaffordable lending in the latest period, 70% of which were from professional agents. During that period, when complaints raised by professional agents were resolved by the ombudsman, the retention rate was 14%, which was higher than 44% for consumers who filed complaints directly.
Viv Kelly, Ombudsman for Consumer Credit at the FOS, said: “The majority of complaints about cheap loans are made by professional representatives. Although the role of professional representatives is important, we are currently receiving some complaints that lack basis.
“In these cases, retention rates may be significantly lower than if consumers complained directly to our service.
“Consumers do not need to use a professional representative to make a complaint about our service. People can come directly to our free independent service and we will see if we can help resolve their complaints.”
Overall, across all complaint categories, the Ombudsman received 47,868 new complaints in the fourth quarter of 2023. In the same period a year ago, 41,303 new complaints were filed.
Outside of credit cards, the other four categories of the top five most complained about products were checking accounts, hire purchase (auto), car/motorcycle insurance, and buildings insurance, all of which increased year over year.
Current accounts continue to have the most complaints about the product, with 7,804 complaints recorded in the most recent period. The Ombudsman said fraud and scams remain the leading cause of checking account complaints.
Credit cards are the second most complained about product.
Hire Purchase (Motors) is the third most complained about product, with 5,419 complaints received in the most recent quarter. Motor Finance Commission complaints accounted for about half of the new hire purchase (motor) complaints received by the Ombudsman.
Following the recent complaints period, the Financial Conduct Authority (FCA) has announced a review of the past arranging and selling of motor finance charges. As part of that, it postponed the deadline for auto finance companies to provide final responses to consumer complaints about some of their fee models. We have also extended the time customers can access the Ombudsman if the company's response does not resolve the issue.
Car/motorcycle insurance was the fourth most filed product with 4,123 complaints in the most recent quarter.
Complaints related to building insurance ranked 5th, with 1,666 complaints received.