Bank complaints handling continue to let down customers

Three quarters of customers with a grievance against their bank make a complaint, but fewer than half of those who complain (47 per cent) are happy with the response they receive, according to new Consumer Focus research.

The banking industry attracted more than 1.25 million complaints in the first half of 2010 alone. The consumer watchdog found that despite being dissatisfied with the initial response from their bank, less than a third (31 per cent) of people then pursue the complaint further. Of these people just  nine per cent  take their complaint to the Financial Ombudsman Service. This is despite evidence suggesting that if consumers do pursue their complaint they can receive a better result than they might expect.  Research on consumers who have used the Ombudsman service shows that nearly three-quarters feel it provides a "fast and efficient service" and that consumers receive compensation in half of the cases it reviews.

Consumer Focus is calling for banks to take complaints more seriously and devote more resources to improving customer service. The consumer champion is also urging the Financial Services Authority (FSA) to continue using the prospect of financial sanctions to keep the pressure on poorly performing firms.  The FSA previously concluded that banks' complaints handling is ‘poor' with more than a third underperforming in this area. 

Oliver Morgans, financial services expert at Consumer Focus said: ‘Customers are willing and able to fight their corner and take the first step of complaining. The problem is they then seem to become disheartened by the banks' poor service and complaints systems. Unfortunately, persistence appears to be the key to getting the answer you would like from your bank.

‘These findings should be a wake-up call for banks who must do more to improve their complaint handling practices. Decent customer service is a necessary part of a healthy market and a successful company. The evidence suggests banks are currently falling a long way short.'

Consumer Focus thinks that poor customer service and complaints handling is a sign of weak competition.  Banks should be using good customer service as one way to differentiate themselves from their competitors, to attract and keep customers and to learn more about how they are performing. Consumer Focus analysis of complaints data from the banks and the Ombudsman shows significant differences on customer service, with some banks performing much better than others.

If banks don't raise their game when it comes to complaint handling, consumers should be able to take their custom elsewhere.  Despite the level of industry complaints, three-quarters of customers have never even considered switching their current account to another bank. Fear of costs when things go wrong, the effort involved and fear of a negative effect on credit rating are key reasons why consumers are reluctant to switch.6 Consumer Focus thinks that if switching was easier and people were more willing to vote with their feet, it would put power back in the hands of consumers, and put pressure on banks to make the market more competitive.

To improve complaint handling for bank customers Consumer Focus is calling for:

Strong enforcement action by the FSA against poor complaint handling practices and for the unfair treatment of customers.

Details of the Financial Ombudsman Service to be given when a consumer first registers a complaint, along with an update at four weeks if the complaint still isn't resolved. That way customers know there is an independent third party if they are unhappy with the result and this may help motivate them to keep going with a long-running complaint.

Changes to the publication of complaints data so that consumers know which banks are (and are not) performing including:

FSA complaint data to be broken down by banking products and always by High Street brand not parent company

Complaints data to be provided so it can be compared against a bank's market share

The regulator to publish how many complaints are resolved at four weeks so consumers can see which banks have a good track record in resolving complaints quickly.