People wronged by banks, pension firms, investment houses and insurers are “being failed” by Britain’s arbiter of financial disputes.
This is the damning verdict of staff at the Financial Ombudsman Service, the last line of defence for consumers battling financial firms for compensation.
Three years since a disastrous reorganisation, there has been an elevenfold increase in the number of complaints still unresolved a year after being lodged with the ombudsman.
According to a whistleblower who still works there, employees are “demoralised” after an MPs’ inquiry last year, which was sparked by a damning Channel 4 investigation that found staff lacked training and felt under intense pressure to hit targets.
The whistleblower, a senior company executive before joining the Financial Ombudsman Service several years ago, told Telegraph Money: “I find it very demoralising. There’s a low morale, particularly among the staff who understand how the system used to work. We can’t do as good a job as we used to do.
“I can’t imagine anyone wanting to work here. It’s not a happy place.”
He said consumers were being let down by long delays in getting their cases resolved and being heard at all. Of particular concern, he said, were complaints about life or health insurance, with families left on tenterhooks waiting to find out if they would or wouldn’t receive life-changing settlements.
“These things matter a lot. If someone is in severe financial distress we try to fast-track them, but you can’t fast-track everyone. They say ‘my life is on hold until I get a decision’, and we’re failing them.”
The ombudsman has the power to order firms to pay up to £350,000 in compensation – and can ask them to pay even more in special cases. But in 2016 it changed how it dealt with complaints.
Instead of using expert adjudicators to deal solely with disputes in their areas of expertise, new investigators were expected to work across all areas of finance.
The result has been a huge drop in the service’s performance, leaving an ever-growing list of people awaiting outcomes on cases that in many instances will involve tens of thousands of pounds.
Since 2016, the number of unresolved claims that have already taken more than a year has increased from 1,000 to 11,274, according to unpublished staff data. Complaints are first dealt with by an “investigator” and only escalated to a more experienced ombudsman if one of the parties wants to appeal the initial decision.
The leaked data show the queue of complaints waiting for an ombudsman’s decision has increased almost fivefold, from 2,560 to 12,127. In addition, the proportion of cases resolved within the target of 45 days has fallen from 48pc to 21pc. The service has come under fire for ballooning staffing costs and expects to spend £332m in 2019-20, up from £244m in 2017-18.
It will spend more than £100m on contractors next year, more than double what it spent two years ago, after cutting permanent staff roles.
A spokesman pointed to last year’s MPs’ review, which found the ombudsman provided an “effective and essential service”.
He said: “The number of complaints that people brought to us last year was at a five-year high. We are also seeing more complex complaints.”
He said contracted staff gave “additional flexibility” and associated costs was “money well spent”.
He added: “Our team works hard to make sure every complaint we handle is investigated thoroughly, to ensure we reach a fair result for people and businesses.”