Financial ombudsmen services are experiencing a spike in complaints as the cost of living crisis continues to bite.
Financial Ombudsman, Susan Taylor from Financial Services Complaints Limited (FSCL) said complaints about lenders and other financial services companies increased by 17.5% in the final six months of last year.
“From higher cost of living costs and interest rates to back-to-school expenses for a lot of families, we are seeing the increasing financial pressure on consumers translating to an increase in complaints,” Taylor said.
Banking Ombudsman Nicola Sladden said the scheme she headed had also experienced an increase in contacts from the public in the last six months of 2022.
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“We are receiving an increasing number of complaints, quarter on quarter,” Sladden said.
Both Sladden and Taylor were expecting further increases in the number of people complaining to them about their financial service providers as the economy worsened, unemployment rose, and people had to refix their home loans at higher rates.
Every financial services company, whether it be a bank, insurer, or lender, must by law be a member of an authorised dispute scheme to which members of the public can complain.
Bank, insurer, lender, broker or adviser done you wrong? Complain to one of the four official financial services complaints services. First published in 2019.
Not all complaints go on to be investigated by the financial ombudsman services, as companies complained about often strike deals with complainants to withdraw their complaints.
It wasn’t just hard times driving the rise in complaints. Taylor and Sladden felt the public was becoming increasingly aware there were schemes they could complain to when they felt badly treated by the likes of banks, insurers, or lenders.
But Taylor also acknowledged that financial mentors had become better networked, and now helped more people take complaints against lenders.
Financial mentors provide free budgeting help for people struggling to make ends meet get their money lives in order, and pay off their debts.
“If they think that a lender has been acting unreasonably, or they think there’s been irresponsible lending, they know now to send the borrower to the dispute resolution service,” Taylor said.
Financial mentor David Verry said that during the Covid lockdowns in 2020, financial mentors formed networks in which they shared knowledge about irresponsible lending, and encouraged each other to complain to the ombudsman services, and Commerce Commission.
“We are now getting more organised as groups, and people are getting more confident to take complaints,” Verry said.
Before Covid struck, mentors tended to only know other mentors from the office they worked out of.
“We were all working in silos, but in the last 12 to 18 months, largely brought on by Covid, we’ve actually ended up talking with mentors from services all over the country,” he said.
As a result of these conversations, taking place through virtual meetings, mentors were becoming more skilled and experienced in taking complaints, he said.
Taylor said complaints about lenders made up about 64% of the complaints FSCL received, with lender complaints up 7% on the same period last year.
“There is unlikely to be any cost-of-living respite for New Zealanders this year. With higher interest rates and increasing pressure,” she said.
People in trouble on their loans needed to get in contact with their lenders as soon as possible, she said.
“The sooner a borrower contacts the lender, the more likely that the lender will be able to provide some hardship relief,” she said.
But Taylor said FSCL had also experienced an increase in complaints about fraud, which could indicate people may be trying to alleviate the financial squeeze through “get-rich- quick” schemes.
Sladden has seen a similar rise in fraud complaints.