Credit card complaints keep ombudsman busy

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The FOS' statistics are an intriguing barometer of the financial sector: while they offer an insight to the issues that consumers are complaining about they're perhaps more interesting because they highlight the complaints that financial providers are failing to deal with to consumers' satisfaction.

This year, 11% of new cases the adjudicator dealt with related to the credit card sector.

The biggest cause for consumer complaint, however, was the mis-selling of payment protection insurance (PPI).

PPI alone accounted for 30% of the ombudsman's caseload.

Credit card complaints

It's the third year in a row that the FOS has recorded record levels of complaints against credit card providers.

According to the report, a substantial number of these cases involved disputes related to section 75 of the Consumer Credit Act 1974.

In particular, the FOS noted, many consumers were seeking recompense after having used their card to purchase membership of holiday clubs which promised special deals on flights and accommodation.

As the membership often amounts to four figure sums, consumers were unsurprisingly annoyed when the special deals sometimes didn't turn out as promised.

Unfortunately, their subsequent assertions that the company has breached its contract are not often upheld by credit card providers and consumers end up taking the complaint further.

"In many of these cases," says the report, "we find that the business said by the consumer to have breached the contract - or to have made the misrepresentation - does not have the necessary legal connection to the business that actually received the credit card payment [to qualify for section 75 protection]."

Other cases frequently filling the ombudsman's in-tray relate to introductory balance transfer deals and other promotional rates on credit cards.

Finally, the FOS still receives a significant number of complaints regarding the default charges issued by card companies. These are due when a cardholder makes a late payment, misses a payment or goes beyond their credit limit and are frequently criticised for being unnecessarily high.

PPI complaints on the rise

However, those one in every ten credit card cases pale in comparison with PPI which now makes up three in ten cases presented to the financial ombudsman - a 58% increase on the previous year.

PPI is already associated with underhand banking practices in the public mind - it's sale alongside borrowing has been banned, for example - and the FOS' figures seem unlikely to change that: the ombudsman upheld 89% of PPI cases in favour of consumers.

Intriguingly, too, the FOS figures show that around two thirds of PPI cases were bought to their attention by claims management firms which charge the consumer a fee to settle their finances, despite the fact that making a complaint to the FOS is free of charge.

What's particularly unsettling is that some of these firms don't even appear to be making a very good job of it.

Of the 0.4% of cases that the FOS categorised as "frivolous and vexatious", 96% were about PPI policies that the consumer had never taken out in the first place.

How to complain

The ombudsman is a free service for those who wish to make a complaint against a financial institution.

Its decisions are binding on the companies involved, making it an important weapon for credit card holders seeking recompense when negotiations with the card issuer have broken down.

Around 50% of cases brought to the FOS are upheld which, considering the alternative of a lengthy, and potentially costly, court battle, is a promising statistic.

To go to the FOS with a problem the complainant must have first made a complaint to the financial institution in question. They should have either received an unsatisfactory reply or not have received one at all for eight weeks.

Despite what the fee-hunting claims management companies say, an individual can make a complaint with little outside assistance. The ombudsman's procedure is geared toward the complainant and simplified as far as possible.