Bob Young, managing director of Capital Home Loans, explains why the Financial Ombudsman Service is so important

In today’s regulatory environment one of the key concerns and responsibilities for all firms is how they deal with customer complaints, ensuring that the grievances of the case brought by the complainant is dealt with fairly and justly and that there is complete transparency throughout the whole process. In financial services complaints are never welcome, however they are inevitable and, without them, many firms would never be able to strengthen the parts of their overall offering which may be weak links in the chain.

Dealing and resolving complaints is a fundamental part of being a lender, particularly in a period when the economic environment is not what we would wish. How a firm deals with a complaint has in the past often been shrouded in a certain degree of mystery and many customers often feel ‘under done’ by a firm’s complaints process. This is why the existence of the Financial Ombudsman Service (FOS) is so important customers who feel their complaint has perhaps not been handled correctly or that the ‘result’ was still unsatisfactory have this independent body which can address their complaint and they know they’ll receive an impartial adjudication on whether their complaint should have merited a different outcome when they initially put it to the firm.

It is important that financial services firms and the public themselves have completely transparent information about the number of complaints made about a firm to FOS and the percentage of complaints upheld by it in favour of consumers. This is exactly what we have with six-monthly set of complaints data relating to individual financial businesses issued by FOS which covers banks, lenders, insurance companies and investment firms.

The most recent data (published last month) covers the consumer complaints handled by the Ombudsman service between the 1 July and 31 December 2009. It is interesting for a variety of reasons but perhaps more so because it segregates the number of new cases the FOS receives by complaint category with one of those categories ‘mortgages and home finance’. As a lender ourselves, this allows us to benchmark our own performance against our peer group and I am pleased to say CHL comes out particularly well.

For example, FOS only publishes data on individual businesses where it has received more than 30 complaint cases during the period. This is why CHL does not appear in the official list – for that particular period 10 new cases were referred to the FOS where the customer was dissatisfied with the complaint decision also in that period four cases were resolved by the Ombudsman and I’m pleased to say that all four were found in favour of CHL.

This obviously gave us a 100% record in terms of resolved cases to put this into some perspective, on the official FOS list for mortgages and home finance, of those lenders who did receive more than 30 cases top of the list of those resolved in their favour were Chelsea Building Society at 95%, most lenders were bracketed in the 40-80% range, whereas GE Money Home Lending Limited came out with 33%.

It is firstly pleasing to be under the 30-case bracket and to be part of the 10% of individual firms which have the least impact on the Ombudsman’s total workload. Overall, FOS received a total of 82,136 new complaints during the period, an increase of 18% on the 64,841 cases received in the first half of 2009. The number of complaints upheld in favour of consumers dropped from 59% in the first half of last year to 53%. Five financial services groups each had more than 3,000 complaints which together accounted for 46,979 cases, over half of all the new complaints received by the Ombudsman during the period. There are approximately 150 businesses which generate about 90% of FOS’s work and the number of new complaints about each of these individual businesses ranged from 31 to 9,952.

The motivation of course is to ensure that the number of complaints received by the firm and FOS is kept to an absolute minimum, and where there are complaints that they are dealt with in a fair, sensitive and timely fashion. As the Ombudsman has indicated, there is always room for improvement, and in particular firms should study and learn from those cases where the Ombudsman has overturned the earlier decision. This type of result indicates a flaw in the firm’s complaints process and it should be addressed immediately to ensure further rulings do not go against it.