Consumers made over 5000 inquiries a day to the Financial Ombudsman Service (FOS) in the year to April, and over 264,000 new cases went on to become formal disputes, a rise of 28% on 2010-11.
The FOS's annual review published this week revealed that financial organisations were ordered to pay compensation to their customers in 64% of cases, a sharp rise from the previous year's 51%.
Chief Ombudsman Natalie Ceeney issued a stiff reminder to financial companies to "remember that complaints are about real people, not numbers, and that complaints handling is about customer service, not box ticking".
Investment complaints fell by 13% to 3308 as fewer people complained in rising market conditions. However, the FOS says it continues to see "increasingly entrenched and fiercely contested" disputes about investment products, with a "legalistic approach to complaints handling" adopted by some firms which meant cases were taking longer to resolve.
It also warns that many investment disputes "involved major financial institutions and large sums of money" – often far more than the £150,000 maximum that the ombudsman can recommend as compensation.
Pensions complaints jumped by 28% to 3454. The FOS says it is continuing to see complaints where consumers have taken out alternative pension arrangements to combat low annuity rates, but ended up taking on higher investment risk as a result. "In many of these cases the problem could have been avoided if the consumer had been given clear information about the important decisions they had to make."
The review adds: "During the year we also continued to see pension-related disputes where the underlying problems resulted from administrative errors involving miscalculations. It is disappointing that these cases were resolved only after they had been escalated to the ombudsman service – and had not been sorted out much earlier by the business itself."
Endowment mortgages accounted for barely 1% of FOS complaints last year, compared with 63% in 2005. However, the Ombudsman warns: "We still anticipate a rise in mortgage endowment complaints in the next few years as the substantial numbers of endowment policies that were sold with 25-year mortgages in the 1990s start to mature, leaving consumers confused and disappointed."
Savers complained that providers had not given them clear enough information about the end of fixed-rate or bonus deals, the review says. "In these cases the savings-account providers in question suggested – wrongly in our view – that the rules excused them."
The sale of "guaranteed equity bonds" also caused problems. "The complaints often involved bonds which were taken out in 2006 and 2007 – and which matured yielding no return," says the review. "We found consumers and savings-account providers alike to be unclear about the rules setting out how these products should be sold."
In banking, there was a rise in complaints about packaged accounts. "In some cases, the consumer says they did not realise their old account had been upgraded to a packaged account, and that they had not given their consent to this change."
There was also a significant increase in disputes involving the joint debts of couples who have separated. The FOS says. "We expect the account provider to take reasonable steps to freeze an account – and to avoid additional joint debt being run up on it – once it has been told about a couple's separation."
Consumers' unreasonable expectations also featured in the review. Some people who had signed up as "guarantors" for loans to members of their family, "did not think they should be asked to pay when the borrower defaulted".
On investment complaints, the FOS warns: "We have also seen cases where consumers eager to take advantage of what seemed to be an exciting investment opportunity – at a time when returns on traditional savings and investments were disappointing – have not always taken the time to reflect on the risks involved."
Motor insurance complaints were up by 26%, many involving rejected claims for stolen cars where "insurers can still be too quick to assume that thefts are not genuine". There were also disputes where the insurer had claimed "non-disclosure" but "the questions they asked the customer [or the questions on a comparison site] were not sufficiently clear".
Buildings insurance complaints rose by 31%. These included frequent complaints that a quotation for a new policy on an insurer's website was cheaper than the renewal premium offered to a long-standing customer. "This does not strike them as fair," the ombudsman observes.