Debt-ridden Britons are swamping the Financial Ombudsman Service (FOS) with complaints about payday lenders, hire purchase companies and point-of-sale loan providers, the organisation’s annual report shows.
The number of complaints about payday loans has more than tripled from 3,216 to 10,529 in the 12 months to March 2017, with complaints about hire purchase agreements up 64 per cent over the period. FOS upheld 59 per cent of claims about payday loan providers over the period.
Point-of-sale loan complaints rose 23 per cent, while catalogue shopping complaints were up 75 per cent.
But complaints about financial advisers fell to just 0.5 per cent of all claims, down from 1 per cent in the previous year.
FOS’s annual report shows the volume of complaints about Sipps and SSASs has jumped by 34 per cent. The majority of these claims relate to investments in high risk, non-standard asset classes, many of which have become illiquid.
AJ Bell head of platform technical Mike Morrison says the figures point to a need for a permitted investment list for Sipps, and says implementing the ban on cold calling for pensions as soon as possible would also add an additional layer of protection for consumers.
Complaints about with-profits bonds rose 27 per cent, with 256 complaints this year, compared to 201 last year.
FOS chief ombudsman and chief executive Caroline Wayman says: “The most striking story has been the rise in contact we’ve had from people having trouble with credit. We’ve seen around three times last year’s volumes of complaints about payday loans. And over the same period – while the numbers involved are smaller – complaints about instalment loans and guarantor loans have risen by 318 and 182 per cent respectively.
The FCA’s action on high-cost short-term credit has had an impact – and we’re generally looking into complaints about borrowing that pre-date its tougher rules. However, taken together with wider insight into consumer indebtedness, it’s clear that financial difficulties and financial exclusion – and the vulnerability they can both bring and result from – remain very current issues.”
Morrison says: “While some of the complaints about Sipps will relate to poor admin or delays, the majority are actually about non-standard asset classes such as hotel rooms in Caribbean holiday resorts, storage pods or car parks. These investments have been allowed in a minority of Sipps following advice from a small minority of advisers. Unfortunately the ‘too good to be true’ nature of the investments turned out to be exactly that.
“A permitted investments list for Sipps, similar to that which existed before pension simplification in 2006 would go a long way to avoiding these situations. Only investments on the permitted list would be covered by the FSCS and it would have to be made clear to investors that anything off that list is not covered.
“The list would include regulated investments for which there is some consumer protection in place already and it would not have to be static, with new regulated categories added in future.
“Unless the industry acts positively then there will always be more to come. A permitted investment list would ensure any new investment options have to meet certain criteria in order to offer a level of protection to consumers.
“Such a list would also have a positive knock on effect on the battle against pension scams because it is often unregulated investment schemes that are used to lure people into the scam. Further protection for consumers in this area would be to implement the proposed ban on pension cold calling as soon as possible. This was delayed by the General Election but there now seems no reason why it should not proceed.”