Credit card complaints to ombudsman service reach record high

Complaints about credit cards reached a record high in the final three months of last year, according to the Financial Ombudsman Service (FOS).

Consumers lodged 5,660 gripes about their credit cards between October 1 2023 and December 31 2023 – the highest level the service has seen for a three-month-period. Its comparable data goes back to the first quarter of the financial year 2014/15.

The organisation, which acts as a free resolution service for consumers and their financial providers, said 3,086 of those complaints were due to perceived unaffordable or irresponsible lending by financial firms.

During the same period a year earlier, there had been 3,216 credit card complaints, of which 665 were about irresponsible or unaffordable lending.

Nearly three quarters of the credit card and unaffordable lending complaints highlighted in the new figures were brought by professional representatives, such as claims management companies and law firms, up from a quarter of these complaints a year earlier.

The FOS said consumer complaints have indicated that in particular, people believe financial providers should have stepped in over persistently high credit balances, high credit limits or provided lower interest rates.

Abby Thomas, chief executive and chief ombudsman 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.

“Owing significant amounts of debt can be stressful and it’s important that consumers are treated fairly and transparently by financial service providers.

“Lenders have a duty to support their customers whatever their circumstances and are obliged to help people who are struggling with debt.”

In total, across a variety of financial products, the ombudsman received nearly 7,500 complaints about perceived irresponsible and unaffordable lending in the latest period, of which 70% were from professional representatives. The uphold rate for those complaints brought by professional representatives which the ombudsman resolved during the period was 14% compared with 44% for consumers who brought complaints directly to the service.

Viv Kelly, ombudsman director for consumer credit at the FOS, 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.

“In these instances, uphold rates can be considerably lower than if a consumer brings a complaint directly to our service.

“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.”

Overall, across all complaint categories, the ombudsman received 47,868 new complaints in the final quarter of 2023. In the same period a year earlier, it received 41,303 new cases.

Aside from credit cards, the other four categories in the top five most complained about products were current accounts, hire purchase (motor), car/motorcycle insurance and buildings insurance, all of which saw year-on-year increases.

Current accounts continue to be the most complained about product with 7,804 gripes recorded in the latest period. Fraud and scams are still the main driver of current account complaints, the ombudsman said.

Credit cards are the second-most complained about product.

Hire purchase (motor) is the third most complained about product with 5,419 complaints in the most recent quarter. Motor finance commission complaints made up around half of the new hire purchase (motor) complaints the ombudsman received.

Since the latest complaints period, the Financial Conduct Authority (FCA) has announced a review of historical motor finance commission arrangements and sales. As part of this, it has paused a deadline for motor finance firms to provide a final response to consumers’ complaints about some commission models. It has also extended the time for customers to approach the ombudsman if firms’ responses have not resolved cases.

Car/motorcycle insurance is the fourth most complained about product with 4,123 gripes in the latest quarter.

Buildings insurance complaints, in fifth place, attracted 1,666 complaints.