2013 Financial Year 2012

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financial year 2012 2013annual review of consumercomplaints about:insurance, credit, banking, savings and investments

key facts We were set up underthe Financial Servicesand Markets Act 2000 toresolve individual disputesbetween consumers andfinancial businesses– fairly, reasonably,quickly and informally.“. settling disputes,without taking sides”If we decide a business hastreated a consumer fairly,we explain why. But if wedecide the business hasacted wrongly, we can ordermatters to be put right. Our service is freeto consumers. Consumers do not haveto accept any decision wemake. But if they accept anombudsman’s decision,it is binding on both themand the business. We do not write the rulesfor financial businesses– or fine them if rules arebroken. That is the job ofthe regulator. Everyone can learnsomething from complaints– so that what has gonewrong in the past neednot happen again.This is why we have acrucial role in sharingwhat we see – to helpprevent future problems. We handle complaintsabout all kinds of moneymatters – from insuranceand mortgages to savingsand credit. If a financial business isn’table to resolve a customercomplaint, we can stepin to settle the dispute.But the business musthave the chance to sortthings out itself first. We are independent andimpartial. When we decidea complaint, we lookcarefully at both sidesof the story and weighup all the facts.

key figures We handled 2,161,439initial enquiries andcomplaints fromconsumers – over 7,000each working day. Around 1 in 4 of the initialconsumer enquiries wereceived turned into aformal dispute – a record508,881 new cases, up92% on the previous year. We resolved 223,229 cases– resulting in compensationfor consumers in 49%of complaints. We resolved 58% of alldisputes within 6 months– and 43% of non-PPIcases within 3 months. We operated on a cost-baseof 150 million with 2,600employees at the end ofthe year. We provided informationand handled enquiries inover 50 different languagesand formats. We took part in over 150seminars, roadshows,exhibitions and events. We handled 574parliamentary enquiries– and 23,381 calls to ourtechnical advice desk,our dedicated service forprofessionals handlingcomplaints in the financialservices sector and theconsumer-advice world. We featured in 6,000 mediastories (including over 550broadcasts) – and 73% ofadults in the UK said theywere aware of the FinancialOmbudsman Service. 74% of new cases wereabout the sale of paymentprotection insurance (PPI),with the number of PPIcomplaints rising 140% to378,699. Investment-relatedcomplaints increasedby 33%, while bankingdisputes and complaintsabout insurance other thanPPI rose by 20% – resultingin the highest ever numbersof these cases. 62% of the total numberof cases we dealt withrelated to 4 banking groups– while 4,819 businessesaccounted for just 3% of ourcaseload.“. sharing what we see,to prevent future problems” All figures relate to the financial year 2012/2013Financial Ombudsman Serviceannual review 2012/20131

contents24chairman’s foreword9chief ombudsman’s report17the complaints we received39what the complaints were about73how we dealt with the complaints91who complained to us133who the complaints were about145other work we have done153our news updates165our board and senior people171index175our services for businesses and consumer advice agencies176what matters to usannual review 2012/2013Financial Ombudsman Service

handled by the adviserson our consumer helpline(see page 18 for more details)508,881 new casesreferred to our adjudicatorsand ombudsmen forfurther work(see page 33 for more details)198,897 cases resolvedby our adjudicatorsAll figures relate to the financial year 2012/2013through mediation,recommended settlementsand adjudicationsan overview of how we handle cases2,161,439 initialenquiries and complaints(see page 74 for more details)24,332 cases resolvedby our ombudsmenmaking formal decisions at the final“appeal” stage of our process(see page 75 for more details)Financial Ombudsman Serviceannual review 2012/20133

chairman’s foreword. we have resolvedmore casesthan in any previous year – and each ofthese cases has called for carefulattentionand individualto detailjudgementSir Nicholas Montagu kcb4annual review 2012/2013Financial Ombudsman Service

chairman’s forewordFinancial Ombudsman Serviceannual review 2012/20135

chairman’s forewordOver the past year, the challenges faced by the FinancialOmbudsman Service have been on a scale that nobody could haveforeseen. This annual review demonstrates that in the starkestterms. During the year consumers referred over half a million newcases to us – including a 140% increase in complaints about missold payment protection insurance (PPI).So it is a matter of great pride tome – and a tribute to the dedicationand professionalism of the peoplewe are lucky to have working for us– that this annual review is a tale notof woe, but of achievement. We haveresolved more cases than in anyprevious year – and each of thosecases has called for careful attentionto detail and individual judgement.There are no short cuts. Of course,we would prefer to be able to offer theprospect of an immediate resolutionto people’s complaints. But where wecannot resolve a dispute as quicklyas we would like, we take pains to6annual review 2012/2013ensure that people are kept abreastof the progress of their case and whatthey can expect from us. I am pleasedto note that our survey evidenceshows that satisfaction amongconsumers who refer complaintsto us remains generally high.That is critical to us in a world whereboth demand for and expectationsof our service are at unprecedentedlevels. A number of external factorshave contributed to this – notablythe further shrinking of confidencein the banking sector, caused byfresh problems this year, such as thecontroversy over the manipulation ofLIBOR, the interest-rate benchmark.Financial Ombudsman Service

In the “blame game” that toooften surrounds the financial sector,there have been suggestions thatthe PPI crisis is a manufacturedone – bolstered by a raft of boguscomplaints made throughclaims-management companies.The evidence suggests that thisis simply not true – as our ratesfor upholding complaints,including those made throughclaims managers, show.At the same time, it is true thatthere is a need for firmer regulationof claims-management companiesat the “cowboy” end of the industry.After all, most of us have experiencedthe irritation of those unsolicitedphone calls, texts and emails.And from the ombudsman’sperspective, we are keen to makeit known still more widely thatconsumers do not need to useclaims-management companies.Financial Ombudsman ServiceThey have an equal chance of“winning” by bringing theircomplaint to us themselvesfor free, which increasing numbersof consumers are now doing.Some might think there is aninevitable danger that the sheervolume of PPI complaints – with upto 2,000 new PPI cases referred tous every day – could take over ourthinking and planning. We will not letit do so. Whatever its scale, PPI will,in the end, be transitory. Meanwhile,our casework in all other areas,from pet insurance to pensions,continues to account for over100,000 complaints annually.chairman’s forewordFor our part, we are committed toworking constructively with ourcounterparts at all levels acrossthe financial services industry,from chairman to caseworker.We believe that by doing so– and by helping them to dealquickly and fairly with the complaintsthat their customers bring them– we can play a role in rebuildingthe trust that has been damagedin recent years.This means we face the task of notletting up on our standards, while atthe same time planning for a futurewhich will inevitably see significantchanges in consumers’ expectationsand behaviour. We are tackling thattask. Our standards and values havenot been allowed to suffer by ourhaving to double in size to meet thehuge growth in demand. Nor willthey do so in the face of the furtherdemands made of our service thatwe expect to see in the coming year.annual review 2012/20137

chairman’s forewordAt the same time, we have beendeveloping innovative solutions tohelp us provide an ever-improvingservice – and we have trialledprojects with financial businessesto explore ways in which we mightprovide a quicker response tocertain complaints.This provides a key to the way wewill develop the service for the future.The customer is firmly at the heartof all our planning. And our aimremains to enable consumers andfinancial businesses to reacha fair and quick resolution to theirdisputes. That points towardsour working increasingly with bothsides to deploy a service tailoredto the nature and complexity of eachindividual complaint. Some caseswill be capable of quick and informalresolution – perhaps through mediation.Others, however, will still call forthe full panoply of our existing moreformal procedures.8annual review 2012/2013That greater responsiveness liesat the heart of our strategy forthe future. Meanwhile, we facethe coming year with optimism:unwavering in our values; strong inour people, our executive and ourboard; and confident in their ability,yet again, to meet the formidablechallenges ahead.Sir Nicholas Montagu KCBMay 2013Financial Ombudsman Service

chief ombudsman’s reportFinancial Ombudsman Serviceannual review 2012/20139

chief ombudsman’s reportAs the chairman comments in his foreword, this has beena year of unprecedented challenges for the ombudsman service.As well as receiving substantially higher volumes of cases thananyone forecast, we have found our caseload increasingly volatile– with a higher proportion of more complex disputes beingreferred to us by consumers.The difficult economic climate –combined with dwindling public trustin “institutions” generally – certainlylies behind many of the challengeswe see. When someone’s financesare stretched, they are more likelyto complain when something goeswrong. And they are more likely topursue that complaint if they don’tfully trust that their complaint hasbeen handled properly.Of course, businesses too areaffected by the challengingeconomic times. We have noticeda higher proportion of cases wherethe positions on both sides are moredeeply entrenched. This affects ourability to resolve cases as quicklyas we – and the parties involved– would want.I should emphasise that theexceptionally high demand for ourservices was not just down to thenumber of complaints about paymentprotection insurance (PPI) morethan doubling. We have seen highernumbers of complaints across therange of products and services thatwe cover.In 2011 we set out five priorities fordeveloping our service. These arethe principles that continue to focusus on what really matters. And I findthem a useful framework for reflectingon our performance over the year.delivering a trusted,fair and easy to use service– for everyoneRetaining our customers’ trust hasnever been more important to us.By the time a consumer reaches us,they have already raised a complaintdirectly with a financial business andhave had that complaint rejected.10annual review 2012/2013Financial Ombudsman Service

Of course, it is equally importantthat the businesses involved indisputes trust us to deal fairly withcomplaints that have been madeagainst them. This trust has to bebased on capability and credibility –on what we know, how we apply ourknowledge, and on how we behave.I talk about this in more detail underthe “knowledge” priority below.Making sure we are accessible isn’tjust a box-ticking exercise or a “niceto do”. It is essential to making surethat people know we are here whenthey need us – particularly in tougheconomic times. We have continuedto develop partnerships with frontlineadvice agencies across the UK– and have worked collaborativelywith consumer groups to makeour service easier to use. Perhapsbecause of our work in this area,we saw increasing demand for ourservices from consumers who toldus they were unemployed.Financial Ombudsman ServiceUnderstanding more about theconsumers who come to us – their age,occupational background, attitudesand behaviour – helps us develop ourservices to meet different people’sneeds. This year, the proportions ofpeople from different socio-economicbackgrounds who came to us remainedbroadly consistent with last year.But we did notice a shift in the age profileof the consumers who came to us.The proportion of consumers over 65who referred complaints to us increasedchief ombudsman’s reportSo it is crucial that consumers trustus to be fair and impartial in the waywe handle and resolve their dispute.I was particularly pleased to see thatour customer research has shownthat when someone had experiencedour service at first hand, their levelof trust in us quadrupled. But resultslike this do not make us complacent.We can always improve – and we willcontinue to work hard to retain ourcustomers’ trust.by 20% during the year – and people inthis age group now account for almosta quarter of the people who use ourservice. In contrast, the number ofyoung consumers who refer complaintsto us is proportionately lower than inthe UK as a whole.These groups of consumers havedifferent needs and expectations.Over half the people aged over 65who we surveyed said they didn’thave internet access. We need tomake sure we continue to take thatinto account in the way we developour service. The inevitable drivetowards online and digital also needsto be tempered by what youngerconsumers have told us – that despitetheir extensive use of social media,they are more likely to have foundout about us through friends, familyor colleagues – and would like ourpresence on social media to berelatively “light touch”.annual review 2012/201311

chief ombudsman’s reportWe use this information – and alot more besides – to make surewe are reaching out effectively andmeaningfully to the people who needour services.sharing our insight ande

making formal decisions at the final “appeal” stage of our process (see page 75 for more details ) All figures relate to the financial year 2012/2013. 4 annual review 2012/2013 . Financial Ombudsman Service Financial Ombudsman Service . annual review 2012/2013 5. chairman’s foreword. Sir Nicholas Montagu . kcb. we have resolved . more cases. than in any previous year – and each of .

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