| |
|
| performance
in the year 2004/05 |
| |
| introduction |
| 2.1 |
At the beginning of 2004, we successfully carried out a major reorganisation, creating a single unit to handle all mortgage complaints.
Previously, the handling of these complaints had been spread across a
number of smaller units. This ambitious reorganisation entailed
simultaneous alterations to our management structure, business process
and case-handling system. |
| 2.2 |
At the same time, we set out to recruit additional staff, mainly to help
maintain service levels for cases about matters other than mortgage
endowments. It was important, as far as possible, to prevent the ever-increasing volume of mortgage endowment complaints from affecting
consumers with other complaints. |
| 2.3 |
It was evident that our handling of mortgage endowment cases would be
affected until we had completed the recruitment and training of the new
staff required to deal with the surge of these complaints. But at least we knew that any delay would not have the same impact as it might have done for other types of complaint. This is because, in most cases of mortgage endowment mis-selling, consumers have not yet suffered a loss in real terms. Their actual loss will not materialise until their mortgage reaches the end of its term – usually some years ahead.
It is important that we set consumers’ expectations appropriately, so that they understand our approach. Each month we monitor consumers’ views about our service. Overall satisfaction is as high for consumers who have mortgage endowment complaints with the ombudsman service as it is for consumers with complaints about other matters – a satisfaction rate of around 80%. |
| 2.4 |
As far as workload volume was concerned, in our plan & budget, published in January 2004, we assumed that we would receive 83,000 new complaints and close 88,000 cases, in itself a considerable challenge. But firms and industry bodies warned us that the new complaint forecast was unrealistic. So we revised our plan in March 2004, forecasting 103,000 new complaints and – with the aim of at least keeping pace – a similar number of closures. |
| 2.5 |
Our customer contact division is our initial point of contact for consumers. A significant part of its work involves seeking to resolve consumers’ problems at an early stage, so that these problems do not become “full-blown” disputes that we have to deal with formally as “chargeable” cases. While not an “official” part of the ombudsman service’s case-handling process, this area of our customer contact division’s work nevertheless plays a key part in our “complaints-prevention” strategy and we are dedicating more resources to developing this area of work. Increasingly during 2004, our customer contact division has been able to resolve many mortgage endowment complaints at this early stage, in instances where a firm has already made an offer but the consumer remains doubtful about accepting it. In the first nine months of the financial year 2004/05, some 10,000 mortgage endowment complaints were resolved by our customer contact division that might otherwise have become “chargeable” cases requiring investigation. |
| |
|
Key activities for the current year 2004/05 |
| 2.6 |
Key areas of activity during the current year – 2004/05 – are as follows. |
| |
|
|
mortgage endowments |
| |
For the third year running, the number of mortgage endowment cases we have dealt with has exceeded the number forecast in our budget. The forecast on which we consulted was 35,000 – a figure we increased to 50,000 in the light of feedback and our experience in 2003/04. In the event, we now expect to receive 67,000 new complaints – nearly double our estimate of a year ago. We have adapted our casework system to help us deal with these cases in as streamlined a way as possible. However, the nature of the complaints means that they require detailed examination to establish the circumstances (at the time of the sale) of the person to whom the endowment was sold, and then to judge whether the sale was suitable. We are working with the FSA and with major firms to try to ensure better-managed and smoother workflow of these complaints. |
|
split capital investment trusts |
|
During 2004/05 we have seen a decrease in the number of new
complaints about these investments. However, the work on resolving
the complex issues involved continues to absorb considerable resource.
In December 2004, the FSA announced the establishment of a
“distribution fund”, with its own terms and conditions in relation to
eligibility. This fund is entirely separate from the Financial Ombudsman
Service. We understand that investors accepting a payment from the
fund will no longer be able to pursue their complaint with the
ombudsman service. More details of the distribution fund are available
on the fund administrator’s website and in the “splits complaints”
section of the “frequently asked questions” on our own website. |
|
single premium investment bonds |
|
So-called “precipice bonds” are the second most common cause of
complaint to the ombudsman service. |
|
mortgage and general insurance intermediaries |
|
Mortgage lenders (other than banks and building societies) and mortgage intermediaries came under our jurisdiction for the first time in November
2004 – and insurance intermediaries came under our jurisdiction on
14 January 2005. This increases the number of authorised firms from
under 10,000 to over 20,000, but we are not expecting a commensurate
increase in new complaints. |
|
Consumer Credit Bill |
| |
In the 2004 Queen’s Speech, the government announced that it intended to introduce new legislation on consumer credit. One aspect of this legislation will be to give access to the Financial Ombudsman Service to consumers with unresolved disputes involving credit agreements with lenders. This is not likely to happen before the spring of 2006, and the legislation will come into effect over a period of time, in line with our ability to absorb the new work. |
| |
| new complaints |
| 2.7 |
Combining the number of mortgage endowment complaints (see para 2.6)
and the number of complaints about other matters, we now expect
the number of new complaints to be 108,000, 5% higher than our revised
figure of 103,000 that we forecast in the spring of 2004. This increase is wholly related to complaints about mortgage endowments, which we now expect to rise to 67,000 – 34% higher than the forecast of 50,000.
Happily, the number of cases about matters other than mortgage
endowments has fallen and we expect to have received fewer of these
complaints by the end of 2004/05 than our estimated figure of 53,000.
This is mainly because of a decline in the number of complaints referred
to us about “precipice bonds” and split capital investment trusts. In
addition, our forecast that some (as yet unidentified) issue might generate around 5,000 complaints in the current financial year does not now seem likely to materialise. And we do not expect to see any significant effect on complaint numbers as a result of extending our compulsory jurisdiction (in the latter part of this financial year) to cover mortgage and general insurance intermediaries. |
| |
|
| cases resolved |
| 2.8 |
We forecast that we will have resolved (“closed”) 93,000 cases by the
end of 2004/05 – 21% more than last year, but 10% fewer than we had
planned in the budget. (Cases closed by our customer contact division –
see para 2.5 – are not included in this total.) Our ability to resolve cases
as quickly as we would have liked has been affected by the challenge of
having to recruit, train and integrate a significant number of new staff,
as described in para 1.10. |
| |
|
| productivity |
| 2.9 |
We expect productivity to be 5% below budget, both for mortgage
endowment cases and for cases about other matters. This is for the
following reasons: |
|
we have relied heavily on our most experienced adjudicators to help
recruit, train, and mentor new staff, which has meant they have had less time to work on cases themselves; and |
|
as described in para 2.5, we have made changes to our handling of
mortgage endowment cases so that – where firms have already made
appropriate offers – the cases are being resolved by our customer
contact division rather than needing to be passed on for investigation as
“chargeable” cases. This means that the cases that are referred to our
case-handling teams are the more complex ones, where both sides are
already deeply entrenched. This inevitably affects productivity levels as
these disputes take much longer to resolve. |
| |
|
|
timeliness |
| 2.10 |
In planning how we would deal with the likely increase in new complaints during 2004/05, we aimed to maintain our timeliness targets for cases about matters other than mortgage endowments. We felt it preferable for any unavoidable delays to affect mortgage endowment complaints, since (as explained in para 2.3) financial losses for those with mortgage endowments have generally not yet materialised.
In the event, our increasing workload, together with the complexity of
many of the complaints reaching us, means that we are unlikely to meet
our timeliness targets for 2004/05. We expect the amount of work-in-progress to increase to the equivalent of 28 weeks’ work, although 85% of this work should be completed within nine months and 90% within 12 months. |
| |
|
|
expenditure and unit cost |
| 2.11 |
The lower number of cases closed and invoiced will reduce our expected
income to £44.5m – 6% lower than forecast. Our expenditure will be 5%
lower than budget – at £45.9m. We therefore expect a deficit for the year of £1.7m – £0.4m greater than we had budgeted for. Our unit cost is forecast to be £495, compared with the budget forecast of £470. These unit cost figures highlight our success in bringing down the cost of handling complaints since 2000/01, when the unit cost was in the region of £750. |
| |
|
|
summary |
| 2.12 |
|
| |
actual
2003/04
|
|
forecast
12 months 2004/05
|
budget
12 months
2004/05
|
| opening
work-in-progress |
|
|
|
|
| mortgage endowment complaints |
6,078 |
26,056 |
26,056 |
26,056 |
| other complaints |
19,426 |
20,645 |
20,645 |
20,645 |
| total |
25,504 |
46,701 |
46,701 |
46,701 |
| |
|
|
|
|
| new complaints |
|
|
|
|
| mortgage endowment complaints |
51,917 |
51,331 |
67,000 |
50,000 |
| other complaints |
45,984 |
30,277 |
41,000 |
53,000 |
| total |
97,901 |
81,608 |
108,000 |
103,000 |
| |
|
|
|
|
| cases resolved |
|
|
|
|
| mortgage endowment complaints |
31,939 |
32,675 |
49,000 |
50,000 |
| other complaints |
44,765 |
29,221 |
44,000 |
53,000 |
| total |
76,704 |
61,896 |
93,000 |
103,000 |
| |
|
|
|
|
| closing work-in-progress |
|
|
|
|
| mortgage endowment complaints |
26,056 |
44,712 |
44,056 |
26,056 |
| other complaints |
20,645 |
21,701 |
17,645 |
20,645 |
| total |
46,701 |
66,413 |
61,701 |
46,701 |
| |
|
|
|
|
| work in hand (weeks) |
|
|
|
|
| mortgage endowment complaints |
24.5 |
37.0 |
35.7 |
27.1 |
| other complaints |
23.5 |
21.0 |
18.2 |
19.0 |
| total |
26.1 |
35.0 |
28.3 |
22.6 |
| |
|
|
|
|
| productivity |
|
|
|
|
| mortgage endowment complaints |
7.6 |
6.2 |
6.2 |
6.9 |
| other complaints |
3.9 |
3.3 |
3.3 |
3.5 |
| total |
4.9 |
4.4 |
4.4 |
4.6 |
| |
|
|
|
|
| closed within 6 months |
|
|
|
|
| mortgage endowment complaints |
|
56% |
44% |
|
| other complaints |
|
70% |
70% |
|
| total |
80% |
65% |
55% |
80% |
| |
|
|
|
|
| unit cost |
£473 |
n/a |
£495 |
£470 |
|
|
