Worryingly, the relentless rise in the number of mis-sold financial products shows no signs of coming to an end.
According to the latest data from the Financial Ombudsman Service, such claims are up more than 20 per cent year on year. In the financial year 2023-24, consumers raised 80,137 cases related to banking and payment products, compared 61,995 complaints in 2022-23.
Current accounts, credit cards and hire purchase are the most prevalent complaint areas, with all showing marked upticks. For current accounts, complaints were up 17 per cent between 2022-23 and 2023-24, credit cards up 68 per cent, and hire purchase ahead 37 per cent.
According to the Fos, it looks likely that this trend will continue into the current financial year.
Taken together with the rises in previous years, this growth in claims is nothing short of staggering.
At least in financial services, the march of evermore stringent regulation does not seem to be resulting in treating customers as they should be.
Surely the extensive year-on-year uprating of back office systems and procedures brought about by the Financial Conduct Authority over the past 20 years should at least slow this increase, if not put it into reverse?
Someone could be forgiven for thinking that more regulation seems to be leading to more mis-selling, which surely is not the case. It can’t be that customer onboarding practices are deteriorating when we all know that these are light years ahead of what they were only a decade ago.
However, if you dig under the surface of the Fos figures you begin to get a better sense of what underpins the dramatic rise.
A clue comes from where the cases are coming from.
Across all categories, increasing levels of complaints are being brought by claims management companies; they accounted for 25 per cent of cases in 2023-24 compared to 18 per cent in the prior financial year.
So to be clear, we have seen a large increase in overall complaints, but an even bigger share is now originating from CMCs.
Case numbers also seem to track the marketing activity of CMCs. Current accounts became the claim du jour in 2022-23 and we can all recall the wall-to-wall advertising on this subject at the time.
Prior to current accounts there was PPI and before PPI there were endowment policies. Diesel emission claims are currently gaining ground thanks to the stream of adverts we are all now seeing.
Given that only around a third of all financial mis-selling claims are upheld, it could be argued that claims companies are generating a tidal wave of unfounded cases.
They do this directly by attracting clients and indirectly by encouraging consumers to make direct claims that turn out to have no merit.
The situation could be worse than the official figures suggest given that the success rate for claimant representing companies, as compared to individuals, is not broken out by the Fos.
