Consumers’ credit complaints jump over summer

Complaints to the Financial Ombudsman Service about credit services jumped in the three months to September, as consumers took issue with high-cost guarantor loans and doorstep lending.

The number of complaints about guarantor loans, where a borrower asks a friend or family member to stand behind their loan should they default, nearly quadrupled over the period to 4,191, while complaints about doorstep lending, or home credit, rose by 97 per cent. 

The rates at which these complaints were upheld were high: consumers won 88 per cent of their complaints about guarantor loans in the quarter, while the rate for home credit was 72 per cent.

In the three months to September, the FOS also received 5,900 complaints related to the Covid-19 pandemic, out of almost 69,000. The number of complaints about financial services related to the pandemic has now reached over 10,000 since the start of the year, it said. 

“Between July and September 2020, we continued to see an increase in complaints from people who borrowed money, who then felt the debt was unaffordable. Complaints arising from Covid-19 also continued to reach us, reflecting the wide-ranging impact of the pandemic on people’s lives,” the FOS said. 

Under consumer regulations, lenders must check that a loan is affordable, meaning the borrower can afford to repay it on time, in full and still cover all their other payments on any other debts, their bills and everyday living expenses. “If it leaves you so short of money you have to borrow somewhere else, or get behind with payments elsewhere, that is not affordable,” said Sara Williams, a debt adviser and author of the Debt Camel blog. 

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Claims management companies (CMCs) have been increasingly active in complaints about guarantor loans and home credit. The FOS said: “Eight in ten complaints about home credit were brought to us via a CMC, compared with an average of just three in 10 across our wider caseload,” it said. 

Those making a successful complaint to the ombudsman on debt affordability grounds may receive a refund of the interest paid on the loan — a refund shared by any claims company involved in the claim. 

Ms Williams said the expense of guarantor loans and home credit was largely responsible for driving up rates of successful claims in these areas. “You’ve always been able to make affordability complaints but you’re more likely to win one if it’s really high interest — because it’s more likely to be unaffordable,” she said.

Travel insurance complaints also more than doubled from 998 in the previous quarter to 2,561 in the three months to September. Andrew Hagger, a personal finance expert and founder of consumer website MoneyComms, said this was likely to reflect the requirement of insurers for customers facing cancelled flights or holidays to turn first to their travel provider for a refund, before making an insurance claim.

Many travellers were unaware of the insurance small print and found themselves frustrated at being caught in the middle between the travel provider, the insurer and sometimes a credit card company, he said. “A lot of people don’t really look at the detail of a travel insurance policy until they come to claim on it. Then it’s too late.” 

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Payment protection insurance (PPI), the finance industry’s biggest ever scandal, remained the most complained-about product, generating nearly 12,800 complaints, but it continued to decline as a proportion of the FoS’s casework.



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