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Credit complaints to FOS on the rise, as guarantor loan cases surge 300%

Complaints to the Financial Ombudsman Service (FOS) about guarantor lenders rose by around 300% between the first and second quarter of 2020, from 1,017 to 4,191.

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According to the latest FOS data released on Monday (9 November), there were “high uphold rates” for complaints in relation to unaffordable lending – specifically for guarantor loans where 88% of all complaints in the second quarter were upheld.


The data also shows Gain Credit topped the list of firms with most new banking and credit complaints, having received 3,920 new cases during the six months ending June 2020, followed by Provident Personal Credit (3,536) and Barclays Bank (8,443).


In a media statement accompanying the statistical announcement, FOS added that the number of complaints specifically relating to affordability had continued rising into the third quarter.


“Between July and September 2020, we continued to see an increase in complaints from people who borrowed money, who then felt the debt was unaffordable,” a spokesman said.


“Complaints arising from Covid-19 also continued to reach us, reflecting the wide-ranging impact of the pandemic on people’s lives.”


However, the rise in complaints relating to credit had started prior to the outbreak of Covid-19. Since the beginning of the year, complaints about guarantor loans, home credit, credit accounts and credit cards have been rising steadily, the data shows.


The publication of the latest statistics follows the release of the FOS annual report, published on the Treasury website last week, which showed that nearly one in three new complaints to the ombudsman received in 2019/20 related to consumer credit and/or unaffordable debt.


From around 125,000 complaints relating to banking and credit in the year to March 2020, half were upheld, while 71% of complaints were upheld (during the same period) in relation to short-term and instalment lending.


In some areas FOS noted that it has seen positive signs of lenders doing more to work with customers, by adopting its preferred approach to complaints resolution.


The FOS report found the behaviour of claims management firms has “caused operational difficulties and delays in some cases, with some complaints poorly‑administered and evidenced”. The ombudsman said it is continuing to flag these “shortcomings” to the FCA.


At Credit Strategy’s Alternative Lending Conference, part of the Credit Festival that began last week, FOS delivered a presentation on its engagement with high-cost, short-term credit providers. They stated that alignment with the ombudsman’s approach, good relationships with FOS and operational resilience and capacity, are the three points that underpin good complaint handling.


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