On 3 March 2021, the Financial Ombudsman Service (FOS) published two sets of statistics.
- quarterly data for October-December 2020 summarises the types of complaints FOS has received.
- half-year data shows which firms had the most complaints in July-December 2020 and how often FOS upheld the customers’ cases.
Caroline Wayman, the FOS CEO says:
“Excluding PPI, new complaints are up by over 55% compared to the same period last year, with more and more people asking for our help to resolve problems with financial businesses.”
The data shows large jumps in complaints about bad credit lending. FOS says that almost all of these complaints were about affordability. FOS has described its general approach to affordability complaints here.
Quarterly stats – more complaints about guarantor loans than PPI!
For the first time since 2007, PPI was not the product with the most complaints at the Ombudsman.
In the last quarter of 2020, two types of bad credit loans have taken over the top spot:
- over 10,000 new complaints about guarantor loans;
- over 6,000 complaints about home credit, also known as doorstep lending.
The change isn’t just because PPI complaints have dropped away, that was expected. But a year ago in the last quarter of 2019, there were only 300 complaints about guarantor loans and just over 400 complaints about home credit.
So the complaints about these types of high-cost lending have rocketed.
Amigo & Provident – the largest numbers of new cases
The two firms in the second half of 2020 with the most new FOS cases were:
- Amigo, with nearly 13,000 new cases in this period, an average of more than 2,000 complaints a month;
- Provident Consumer Credit, with over 10,000 new cases in the period.
The new FOS statistics show that FOS has agreed with the customer in a massive 88% of Amigo cases in the second half of 2020 – unchanged from the first half of 2020. And the uphold rate for Provident is nearly as high at 75%.
This suggests that both Amigo and Provident have been rejecting or making poor offers to a lot of their customers’ complaints. Debt Camel readers’ comments back this up – here are a few comments about Provident in the last two weeks:
- “Had about 30 loans over the years, with £23000 interest. Provident said they were all affordable“.
- “I have just received a letter back from Provident rejecting all 13 loans. The loans dated from 2007 – 2015.” These loans had started at £500 and finished at £2500.
- “11 loans from 2012-2016….. varying amounts from £200 too £2000. Provident say they were all affordable but if you look at the dates everytime one was paid up it was because I had taken another loan.“
Other bad credit lenders – cases mostly up
FOS statistics give the lenders’ corporate name – but here I’ll use the more familiar brand names.
Amigo dominates the guarantor market but the half-year FOS statistics show other guarantor lenders are also seeing many more complaints, including George Banco, UK Credit and Trust Two.
Similarly for doorstep lending – it’s not just Provident. Morses and Loans at Home have had a lot more FOS cases.
Lenders offering large bad credit loans such as 118 Money, Everyday Loans, Likely Loans, Loans2Go and Bamboo have also seen large increases in their FOS cases.
In contrast, some payday lenders have seen drops in FOS complaints. Lending Stream’s cases fell to about 2,500 in the last half of 2020, from nearly 4,000 in the first half of the year. Other payday lenders such as Safetynet Credit have seen their complaint numbers unchanged.
Car finance lenders have seen many new complaints. The prime lender Volkswagen’s complaints doubled from the first half of 2020 to the second half. Moneybarn, a bad credit lender, had its complaints more than treble. Some of these complaints will be about affordability but there are many other reasons why customers complain about car finance, as the FOS case studies show.
Also increasing are complaints about catalogue and sub prime credit cards such as Shop Direct and New Day, but not all these will be affordability complaints.
Amigo can’t afford to pay the refunds in full
Amigo has already said it can’t afford to keep paying full refunds on all the complaints it is getting so it is seeking protection in a Scheme of Arrangement. By the time the next FOS half year data comes out, Amigo will probably either be in a Scheme or in administration.
It is hard to guess if Provident might also be in financial difficulty. Its parent, Provident Financial Group, owns the very profitable Vanquis credit card. If it chooses, PFG could carry on paying out full refunds to its doorstep lending customers who were given unaffordable loans until the numbers drop off – the fall in Lending Stream cases shows this can be done. But if the Amigo Scheme is allowed to proceed, might PFG want to cap its liabilities and pay only small amounts out on affordability complaints?
Some smaller lenders may potentially also be in difficulty. Their complaint numbers may only be in the hundreds, but that may be a lot for companies with a smaller capital base. And they may well not be able to afford the very high up-front costs of setting up a Scheme of Arrangement.
The Amigo Scheme presents the FCA with a big problem because of the anti-competitive implications. To allow a major bad credit lender to carry on in business but evade paying full compensation to its customers would make life much harder for the other bad credit lenders who are still paying full refunds.
UPDATE on 15 March Provident too gave up and asked for a Scheme, which was approved in August. See Provident’s Refund Scheme for the latest news on this.