Complaints regarding UK banking services have seen a significant spike in the first half of 2024, with consumers increasingly voicing their frustrations over issues related to credit cards, motor finance, and concerns about unaffordable lending practices, fraud, and scams.
In the first six months of 2024, the Financial Ombudsman Service (FOS) reported 101,031 complaints about banking and credit cards, a sharp rise from the 56,690 recorded during the same period in 2023. This surge is part of a broader trend, with total complaints across all financial products increasing by 40%, reaching 133,019 cases.
The banking and credit sectors remain the top sources of complaints, continuing to outpace other categories. Notably, this sector is the only one that saw a year-over-year increase in complaints. Despite this, the FOS upheld 35% of cases in favour of consumers, a slight decrease from the 37% recorded in the first half of 2023.
A key area driving the increase in complaints has been issues surrounding motor finance. Complaints related to car finance have surged following the Financial Conduct Authority’s (FCA) announcement in January 2024 of an investigation into whether customers were being unfairly charged high interest rates due to now-banned commission arrangements. The motor finance sector could face up to £16 billion in compensation payouts, with the FCA set to outline its next steps by May 2025.
The crisis arises as banks are concurrently facing an £18 billion class action lawsuit linked to Payment Protection Insurance (PPI) commission charges.
There has also been a notable rise in complaints directed towards professional representatives, including claims management firms. In the first half of 2024, these representatives accounted for more than half of all banking and credit-related complaints, a stark increase from just 25% of complaints in 2023. They have faced scrutiny for submitting bulk claims without verifying their merit and for failing to respond to requests for supporting evidence from the FOS.
To address this, the FOS has proposed introducing a £250 fee for professional representatives to submit a case, which would be reduced to £75 if the outcome favours the consumer. This proposal has received backing from UK Finance, the banking industry trade group, which emphasized the importance of ensuring claims are well-founded and supported by evidence.
UK Finance also highlighted that credit card companies and lenders are subject to strict regulatory rules to ensure that lending remains affordable. Furthermore, they offer a variety of support services to customers facing financial challenges or struggling with repayments.
This surge in complaints underscores a broader dissatisfaction with certain banking and finance practices in the UK. As investigations into car finance continue and the FOS works to address the rising number of disputes, the importance of consumer protection remains a focal point for regulators and the financial industry alike. Financial institutions are now under increased pressure to demonstrate transparency, fairness, and a commitment to putting customer interests first.
