Insights from FCA and FOS Complaint Data: Themes, Learnings, and the Consumer Duty Imperative

The Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) have published complaint data for the second half of 2023 (H2 2023) and the first half of 2024 (H1 2024). These insights reveal trends in consumer experiences across the financial services sector and provide essential learnings in light of the new Consumer Duty regulations. This summary explores the key themes, identifies systemic issues, and outlines actionable steps firms can take to align with regulatory expectations and improve customer outcomes. 

2024 Review Insights from FCA and FOS Complaint Data

FCA Complaint Data Analysis

Overall Trends: In H2 2023, financial services firms received approximately 1.87 million complaints, a slight decrease from 1.89 million from the previous period. The percentage of upheld complaints decreased from 61% in H1 2023 to 58% in H2 2023. This, however, is largely driven by the best performing sectors (Banking and Consumer Credit), and partially masking the sectors at most risk (Pensions and Investments). Despite this, the total amount of redress paid increased by 10% to £259 million, suggesting that while fewer complaints were upheld, the value or severity of those upheld rose. 

In H1 2024, the total number of complaints further declined by 4% to 1.86 million compared to H2 2023. However, certain product groups experienced increases in complaints: 

• Decumulation & Pensions: Complaints rose by 7.1% from 86,885 in H2 2023 to 93,023 in H1 2024. 

• Insurance & Pure Protection: Complaints increased by 1.4%, from 754,010 in H2 2023 to 764,254 in H1 2024. 

• Investments: Complaints grew by 2.1%, from 61,513 in H2 2023 to 62,806 in H1 2024. 

Conversely, the Banking and Credit Cards sector saw a notable 9.6% decrease in complaints, from 941,664 in H2 2023 to 850,948 in H1 2024. The Home Finance sector experienced a modest 1.7% decline, from 94,881 in H2 2023 to 93,237 in H1 2024. 

FOS Complaint Data Analysis 

The FOS reported a significant increase in new complaints, receiving 73,692 between July and September 2024, a 58% rise compared to the same period in the previous year. The overall uphold rate was 34%, highlighting recurring systemic issues in certain product areas. Additionally, it is worth noting the increases in escalations to the FOS against the backdrop of reducing complaint volumes reported by firms. This is another indicator that customers remain dissatisfied with either the outcome of the complaint or with how the complaint was handled, leading them to escalate further. This alone is a risk that firms need to recognise and explore where their processes need to improve. 

Key trends included: 

1. Credit Cards: Complaints reached an all-time quarterly high of 22,366, a substantial increase from 4,505 in the same period the previous year. Many complaints centred on irresponsible lending practices, high credit limits, and unaffordable borrowing. 

1. Fraud and Scams: Fraud cases surged, with 9,091 complaints in the quarter, up significantly from 6,264 in the same period last year. Of these, 4,956 related to authorised push payment (APP) scams, emphasizing the need for stronger fraud prevention measures. 

1. Current Accounts: Complaints rose to 9,186, up from 7,880 in the same period the previous year, with issues often linked to service failures and lack of proactive support. 

High Uphold Rates: A Sign of Systemic Issues 

Recurring high uphold rates signal systemic weaknesses in firms’ business-as-usual (BAU) operations. These rates, representing the percentage of complaints resolved in the consumer’s favour, highlight areas where firms may be failing to deliver good outcomes. 

Areas with High Uphold Rates 

1. Credit Cards and Personal Loans: 

• High uphold rates reflect inadequate affordability checks and unsustainable lending decisions. 

• Customers often report dissatisfaction with how credit limits are set and monitored. 

1. Fraud and Scams: 

• Persistent high uphold rates in authorised push payment (APP) scam complaints indicate insufficient fraud detection and prevention measures. 

• Consumers frequently cite delays and inadequate responses to reported fraud. 

1. Pensions and Investments: 

• Miscommunication, lack of transparency, and unsuitable advice lead to high uphold rates, revealing gaps in how firms assess and communicate with customers. 

Consumer Duty Implications 

Under the Consumer Duty, firms are required to deliver good outcomes for retail customers, making high uphold rates a red flag for potential systemic failings. These rates point to failures in BAU operations and signal the need for urgent action to improve customer experiences. 

DISP Requirements: Root Cause Analysis and Preventative Measures 

The FCA’s DISP rules emphasise the importance of root cause analysis and proactive measures to prevent recurring complaints. Firms must: 

1. Identify Patterns: Analyse complaints data to uncover recurring themes that may indicate systemic issues. 

1. Assess Processes: Evaluate whether existing processes, such as lending or fraud prevention protocols, are contributing to poor outcomes. 

1. Implement Preventative Measures: Take proactive steps to address root causes, such as:  

• Enhancing Policies and Training: Equip staff with the skills to identify and resolve issues before they escalate. 

• Improving Transparency: Clearly communicate product terms and risks to customers, especially in complex areas like pensions and investments. 

• Strengthening Fraud Prevention: Invest in robust systems to detect and prevent fraud and educate customers on how to protect themselves. 

Learning and Continuous Improvement 

The FCA’s expectations align with DISP’s requirement that firms not only resolve individual grievances but also learn from them. This involves: 

• Establishing feedback loops to incorporate insights from complaints into product and service enhancements. 

• Regularly reviewing and adapting processes to address systemic issues. 

• Collaborating with industry peers to share best practices and stay ahead of emerging risks. 

Conclusion 

The FCA and FOS data from H2 2023 and H1 2024 underscore the importance of addressing systemic issues to align with the Consumer Duty. High uphold rates, recurring themes in complaints, and increases in fraud cases all point to areas where firms must improve. By prioritising root cause analysis, preventative measures, and continuous improvement, firms can enhance customer outcomes, reduce regulatory risk, and build trust in the financial services sector.

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