Strategic plans and budget for 2019/2020 - Financial Ombudsman
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strategic plans and budget for 2019/2020 1
about us
We were set up by Parliament under the Financial Services and
Markets Act 2000 to resolve individual complaints between
financial businesses and their customers – fairly, reasonably
and as informally as possible. From April 2019, our remit will be
extended to more complaints made by small and medium-sized
enterprises about financial businesses, and to complaints made by
customers of claims management companies.
If a business and their customer can’t resolve a problem
themselves, we can step in to sort things out. Independent and
unbiased, we’ll get to the heart of what’s happened and reach
an answer that helps both sides move on. And if someone’s been
treated unfairly, we’ll use our powers to make sure things are
put right. This could mean telling the business to apologise, to
take action or to pay compensation – in a way that reflects the
particular circumstances.
In resolving hundreds of thousands of complaints every year,
we see the impact on people from all sorts of backgrounds and
livelihoods. We’re committed to sharing our insight and experience
to encourage fairness and confidence in the different sectors we
cover.
2about this
consultation
overview
questions and how to respond 5
chief ombudsman & chief executive's introduction 7
1 horizon one – current outlook for 2018/2019 10
In this chapter we set out our forecasts for the current
financial year. In what’s been a challenging year so far,
there’s been a continued upward trend in demand for
our service, and we’ve received more than double the
complaints about short-term lending than we budgeted for.
We’ve continued to invest in our case handling capacity to
help us deal with the ongoing uncertainty and volatility we
expect in the future. This includes a potential significant
spike in PPI complaints as the FCA’s deadline approaches,
which we haven’t seen so far.
2 h
orizon two – our plans and budget for
2019/2020 and forward look to April 2021 18
In this chapter we detail our plans and budget for the
next financial year, and look ahead to the months
immediately beyond the FCA’s PPI complaint deadline.
As well as ensuring we can respond flexibly to as-yet
uncertain demand, we have been investing in our people,
developing our digital services, and preparing for an
extension to our remit to complaints from more small
and medium sized businesses and customers of claims
management companies. To ensure we can resource and
develop our service in the way we need to, we propose to
raise an additional £20m through our levy.
33 horizon three – looking ahead, shaping our strategy 34
In this chapter we look further ahead, setting out how
we’ll be developing our future strategy. Building on our
focus on remaining relevant and sustainable, we’ll need
to consider how people’s expectations will continue
to change – and what that could mean for our guiding
principles, how we deliver our service and how we
evaluate the wider value of what we do. Our next steps will
include listening to the perspectives of our people and our
stakeholders, before we set out a strategic proposal later
in 2019.
4 our future funding 42
In this chapter we discuss how our funding arrangements
will need to change to ensure we can deliver the service
people need us to in the future – when we’re no longer
dealing with PPI complaints in such high volumes.
Depending on how our income is split between levies and
case fees, different potential options – such those we’ve
illustrated – will have advantages and disadvantages.
We want to hear as many perspectives as possible so we
can find a fair and sustainable solution – and will consult
further on this later in 2019.
5 Richard Lloyd’s recommendations –
review of our progress 51
In this chapter we give an update on the action we’ve
taken in response to the recommendations of Richard
Lloyd’s independent review, which our Board accepted in
July 2018. This action – ranging from further developing
our quality assurance processes, to strengthening
engagement with our people – forms a fundamental part
of both our short-term and future strategy. In appendix b
we share the results of the exercise we commissioned
to check an appropriate sample of our casework
(recommendation nine) – a two-stage process carried out
by our internal auditors and Carol Brady MBE.
6 appendices 63
appendix a FEES instrument for 2019/2020 64
appendix b independent exercise to check a
sample of our casework 77
4overview
questions and how to respond
horizon one
1 What’s your perspective on the trends we’ve highlighted?
Are there other trends you’re seeing, or any insights you have, that you
2 think we should take into account in our plans?
What do you think about our projections for the volumes of complaints
3 we’ll see up to 31 March 2019?
horizon two
What do you think about our projections for the volumes of complaints
4 we’ll receive and resolve in 2019/2020?
What are your views on the uncertainties we’re facing in PPI and short-
5 term lending?
What are your views on our plans for our new small and medium-sized
6 enterprise (SME) jurisdiction?
What are your views on our plans for our new claims management
7 company (CMC) jurisdiction?
8 What are your views on our plans to develop our service in 2019/2020?
What are your views on our proposed funding arrangements for
9 2019/2020, including increasing our levy?
horizon three
How far do you think our guiding principles remain relevant as we look
10 ahead?
11 What are your views on the questions we’ve set out?
Are there any other questions you think we need to ask, or any other
12 developments you think we should take into account?
What do you think about the next steps we’ve identified in developing
13 our strategy?
14 Do you have any other feedback about our strategic approach?
5overview
our future funding
15 What are your views on the principles that underpin our funding?
16 What do you think about the funding options we’ve presented?
17 When do you think we should change our funding model?
18 Do you have any other views about our future funding?
Please respond by 31 January 2019 to:
stakeholder team – consultation responses
PO Box 69989
Financial Ombudsman Service
London
E14 1PR
You can also email consultations@financial-ombudsman.org.uk
or respond online at ombudsman1920.questionpro.eu
We may want to publish the responses we receive – and in
the interests of transparency, we encourage non-confidential
responses. If you do send us a confidential response, please
tell us why you consider the information confidential. We can’t
guarantee that confidentiality can always be maintained, and we
won’t view an automatic email confidentiality disclaimer
as binding.
the next steps
17 December 2018 our consultation opens
31 January 2019 deadline for responses
6 March 2019 ombudsman service’s board considers
final budget
22 March 2019 FCA board considers ombudsman
service’s final budget
by 31 March 2019 ombudsman service adopts final budget
and publishes our plans for the year
ahead 2019/2020
6overview
chief ombudsman
& chief executive's
introduction
But if PPI was once the main a surge in complaints – at a time
Today, around eight story, that isn’t the case any and scale that aren’t yet clear.
months from the FCA’s longer. Continuing recent trends,
in 2018/2019 we’ve seen a This public consultation is a
PPI complaints deadline, chance for us to set out our
that episode of mass mis- further steep rise in complaints
involving short-term lending such plans for the coming financial
selling accounts for more year – highlighting the demand
as payday and instalment loans.
than four in ten complaints This has happened against a we expect, and how we’ll
we receive. It’s still background of a general rise respond to it. Faced with this
necessarily a significant in complaints, including those level of volatility and uncertainty,
focus for us, the FCA and arising from borrowing and debt we’re especially grateful for
financial businesses, as generally, as well as from trouble the perspectives that our
stakeholders – whether they
well as for customers and with bank IT systems.
represent large financial groups,
those representing them. At this point – as we look small specialist businesses, or
ahead to 2019/2020 – we’re the interests of financial services
experiencing the highest customers – continue to share
demand for five years, despite with us.
receiving fewer PPI complaints
than anticipated. In the near As we prepare to take on new
future, however, the approaching and significant responsibilities,
PPI deadline is likely to result in our stakeholders’ insight is
7overview
more important than ever. From
1 April 2019, around 210,000
more small and medium-sized
enterprises will have access to
our service, and our remit will
also be extended to complaints
about claims management
companies. This consultation
also details our plans for
managing these areas of work.
The FCA and Parliament have
trusted us to provide the quality
of service required by the parties
involved – and that’s what we’ll
be focused on in the months
ahead.
In view of these significant
In July 2018 we accepted all Caroline Wayman
developments, and with the end
the recommendations made chief ombudsman &
of PPI in sight, we’re also asking
by Richard Lloyd, following chief executive
for feedback on our longer-term
his independent review of our 17 December 2018
strategy. The time horizons this
service. These recommendations
consultation follows, spanning
form a key part of our plans,
the current financial year through
and in the final chapter of this
to 2025 and beyond, provide a
consultation we provide a
framework for thinking about
separate update on the action
our immediate priorities – but
we’ve taken in response to them.
also about the principles of an
effective future ombudsman It’s essential we keep listening
service, in a landscape that’s and learning – both to our own
very different to the one in which people, who care so much
we were established nearly 20 about the work we do, and to
years ago. the widest possible range of
stakeholders – so we continue
This thinking includes
to provide the forward-looking
considering all options in respect
and effective service people rely
of our funding – which, in line
on and expect. I look forward to
with the commitment we made
hearing your views about what’s
last year, we’ve already begun to
next.
discuss with our stakeholders.
We’d welcome further views on
how – in light of how financial
services, and complaints,
continue to evolve – our service
can be paid for in a fair and
stable way.
As we look ahead, we’re
making sure we reflect on
our own recent experience
of change, and getting to the
heart of what we can do better.
8overview
looking ahead
April 2025
horizon
three
April 2021 looking
horizon delivering further ahead
two our strategy
lis
te
changing our
inn
finally resolving PPI
g
funding model
an
April 2019
d
horizon
le
ar
one shaping our
ni
delivering our
n
future strategy
g
2019/2020 plan
embedding delivering our
Richard Lloyd’s 2018/2019 plans
recommendations
hearing
being relevant perspectives
and sustainable on the future
where we are now
9horizon one
1 horizon one
current outlook for 2018/2019
In this chapter we review 2018/2019 has been a very
the current financial year, challenging year – both in terms
2018/2019, explaining of the continued high volumes
of complaints we’ve received,
how far the work we’ve
and the volatility in demand that
needed to do aligns with we’ve needed to manage. In
the plans and budget we set response, we’ve been investing
in March 2018. We outline in our case-handling capacity
notable trends we’ve seen in our general casework, and
in complaints, and the anticipate an upward trend in
ways we’ve continued to demand to continue into next
develop our service – which year. However, we’ve received
will inform the plans and fewer PPI complaints than we
thought we might have at this
budget we’ll need to set for
stage before the complaints
2019/2020. deadline.
10horizon one
new complaints
forecast
2017/2018 2018/2019 2018/2019
financial product or service comparison with
actual budget latest forecast
2017/2018 actual
PPI 186,417 220,000 200,000 7%
general casework including 123,498 130,000 145,000 17%
banking and credit (except
packaged bank accounts and 74,162 74,900 90,500 22%
short-term lending)
insurance (except PPI) 36,704 40,000 40,000 9%
investments and pensions 12,632 15,100 14,500 15%
packaged bank accounts 11,674 10,000 12,000 3%
short-term lending 172%
18,378 20,000 50,000
(payday and instalment loans)
total 339,967 380,000 407,000 20%
resolved complaints
forecast
2017/2018 2018/2019 2018/2019
financial product or service comparison with
actual budget latest forecast
2017/2018 actual
PPI 258,331 250,000 230,000 11%
general casework including 118,874 130,000 120,000 1%
banking and credit (except
packaged bank accounts and 69,571 74,900 76,200 10%
short-term lending)
insurance (except PPI) 36,626 40,000 33,500 9%
investments and pensions 12,677 15,100 10,300 19%
packaged bank accounts 11,719 10,000 12,000 2%
short-term lending 70%
11,734 20,000 20,000
(payday and instalment loans)
total 400,658 410,000 382,000 5%
11horizon one
complaint trends and our service. There remains rise in complaints about
uncertainty about whether or short-term lending
issues we’ve seen when this spike will happen, as
well as how many complaints
PPI it might involve. There’s more
For the first time in eight in the next chapter about what 1,114
might happen before this 2014/2015
years, less than half the new
complaints we’re receiving episode of mass mis-selling
are about PPI. In 2018/2019 is finally resolved, and how
we planned to resolve 30,000 we plan to manage our PPI
more complaints than we workload to its conclusion. 3,089
received. We’re on course to 2015/2016
do so – but having received borrowing and debt
around 20,000 fewer complaints
than we’d budgeted for, we
We explained in our 2017/2018
annual review that we’d
11,412
now expect to resolve 230,000 continued to see a significant 2016/2017
cases, rather than 250,000. A increase in complaints from
claims management company people who had concerns
continues to tell us it plans after borrowing money. This
to judicially review our well-
established approach to
trend cut across different areas
of consumer credit – which 18,378
resolving PPI complaints, which includes financial services 2017/2018
is affecting our ability to move that are the subject of ongoing
forward a significant number of regulatory focus, such as
cases. hire purchase, rent-to-own
Of the complaints we resolve, and doorstep lending. We’ve
publicly shared our concerns
50,000
we expect around 33,000 will
centre on undisclosed high that, in a significant number
commission, following the case of complaints, lenders aren’t
of Plevin v Paragon Personal doing enough to ensure
2018/2019
Finance Limited. In our previous their customers’ borrowing
plans and budget consultations, is sustainable, which can
we’ve explained the delays we leave those customers in very
were experiencing at that time vulnerable circumstances. The
in resolving complaints affected FCA has recently announced actual latest view
by Plevin – as the FCA consulted that a price cap will apply to the
extensively on proposed rent-to-own sector from April
rules and guidance relating to 2019.
the issues involved. It’s now Within the context of this overall
been clarified that, in some increase, the rate of the rise in
circumstances, more people – complaints about payday and
those affected by the recurring instalment loans is particularly
non-disclosure of commission – pronounced. By the end of
may now be due compensation. 2018/2019, we expect to receive
Eight months before the FCA’s more than 200% of the volumes
PPI complaints deadline of of these complaints than we did
29 August 2019, we haven’t in the whole of the previous year
yet seen a significant spike – 50,000 cases, compared with
in volumes of complaints to the 20,000 we’d planned for.
12horizon one
So far this year we’ve upheld if they were unable to meet their banking and other types
around five in ten of the financial commitments. And of credit
complaints we’ve received. as more people raise concerns
Typically, we’re hearing from about lending that’s happened Together, PPI and short-term
people who’ve been given many previously, concerns have lending account for around 60%
loans. And in many cases, we’re been raised about the long- of our caseload. However, we’ve
deciding that lenders have failed term sustainability of some seen growing demand for our
both to ask sufficient questions businesses. help in other areas – including
upfront, and ask sufficient banking, where we’ve received
In August 2018, Wonga, one of around 20% more complaints
questions as the relationship the best-known payday lenders, than we projected at the
continues – to ensure it’s went into administration. At
responsible to continue to beginning of the year.
that point, complaints about
lend and sustainable for their Wonga accounted for 22% of During the summer of 2018,
customer. the complaints we’d received IT trouble at the bank TSB
about short-term lending as a accounted for a significant rise
Given the likelihood of
whole. Following discussion in people contacting us about
compensation being paid,
it’s unsurprising that claims with the FCA and the appointed banking. Over recent years
insolvency practitioners, we’ve handled a number of
management companies are
we’ve been directing Wonga instances of online banking
particularly active in this area.
Over the last two years, the customers to the administrators outages – and have worked with
– who will be deciding whether banks to understand the steps
proportion of complaints we’ve
people are creditors and, if they need to take to ensure
received via these companies
so, how much money they are they address the practical
has risen from one in ten to
due to receive. The Financial impact of the problems, which
eight in ten – similar levels to
Services Compensation Scheme often goes well beyond the
PPI. Businesses in this sector inconvenience of being unable
(FSCS) – the “final safety net”
have shared concerns with us to log in. With online banking
for customers of financial
about some CMCs’ behaviour. increasingly the norm, we, like
businesses that stop trading –
To ensure payday borrowers are banks themselves, need to be
doesn’t cover consumer credit
treated fairly – and as we’ve ready to respond to these types
lending activities.
done previously with PPI and of problems with the urgency
packaged bank accounts – As we set our plans, we’re very required.
we’ve continued to remind CMCs mindful that we could need
about what’s expected of them to scale up in response to an We’ve also continued to see
and to share what we’re seeing anticipated rise in demand steady numbers of complaints
with the Claims Management for our help. However, we’re involving banking fraud and
Regulator. mindful too of the potentially scams. We’ve explained to
heightened risk around the businesses that – in view of
On the basis of current trends, ongoing sustainability of some the growing sophistication of
we’ll need to be prepared to lenders, which could leave us criminals’ methods – it isn’t
receive significant volumes of unable to take forward their fair to automatically assume
complaints about short-term customers’ complaints. To help customers who’ve lost money
lending in the next financial prevent problems arising in the to fraudsters have acted with
year. However, in October 2018, first place, we’ve continued to “gross negligence”. Under
the FCA wrote to lenders in this engage with credit providers – the rules that currently apply
sector telling them to review sharing examples of the issues in this area, there are limited
their current practices, consider we’re seeing in their complaints circumstances in which we
whether any proactive redress handling. There’s more detail can help people who’ve been
is required, and to take our in the next chapter about our victims of “authorised push
decisions into account. The FCA projections around short-term payment” (APP) scams, where
also told lenders to inform them lending next year. they’ve unwittingly transferred
13horizon one
money to fraudsters. The FCA During the year, the perceived Advisers have told us they’re
has proposed to extend our unfairness of year-on-year particularly concerned about
remit from January 2019, so we insurance premium increases potential complaints involving
can look into complaints from has received sustained media transfers out of defined benefit
people who are unhappy with attention – and in particular, pension schemes. This includes
the actions of the bank that examples where the people complaints from people who
received the funds following a involved are vulnerable in feel they shouldn’t have been
scam. some way. In April we shared advised to transfer out, think
our insight into complaints we they’ve lost out due to delays,
Consistent with the rise we’ve were receiving from people in or are unhappy with advisers
seen in complaints about debt, this position – to help insurers who’ve refused to help them
we’ve received nearly 20% more understand how we make a access their pension pot.
complaints involving credit call about the fairness of an
cards. We’re also working with increase, and to help insurance This year we’ve continued to
the Department for Business, customers understand the invest in our case handlers’
Energy and Industrial Strategy situations where premium training to ensure the ongoing
to help resolve remaining increases may be justified. consistency and fairness of our
complaints arising from the answers to these complaints.
liquidation of Green Deal In September 2018 Citizens In September 2018 we invited
providers. Outside these issues, Advice announced it was a panel of pensions experts –
we haven’t seen significant making a super-complaint to including the Pensions Advisory
new trends in complaints about the Competition and Markets Service’s chief executive
banking and more traditional Authority (CMA) about this Michelle Cracknell, former
forms of lending such as “loyalty penalty” – and the pensions minister Sir Steve
mortgages. FCA will now carry out a market Webb and consultants from
study to look into the issues in Aon Hewitt – to share their
insurance more detail. experience and insight with
our people and discuss the
In 2018/2019 complaints about investments and pensions issues involved in complaints.
insurance have been at the
And to give advisers greater
level we expected. Within this Our current forecasts show
clarity about our approach to
caseload, we’ve seen a rise complaints relating to
resolving individual complaints,
in people contacting us about investments and pensions
we’ve published detailed case
buildings insurance, as well as being broadly in line with
studies illustrating the types
about home emergency cover. our expectations. Although
of problems we see, alongside
these complaints represent a
Some of these complaints commentary from the FCA
small proportion of our overall
can be attributed to weather and The Pensions Regulator.
casework, they account for a
extremes the UK has In October 2018, the FCA
significant proportion of the
experienced over recent published its final rules and
complaints we receive about
months – which have resulted guidance relating to pension
financial advisers. The issues
in damage to property, including involved can be particularly transfer advice – confirming
greater incidence of subsidence. complex and entrenched – with its stance that advisers should
Compared with other areas, start from the position that
a customer on one hand telling
such as banking, there can a people will be better off not
us they’re potentially facing
be more of a delay between a transferring their pension.
significant losses, and on the
problem arising and a complaint other hand, a financial adviser
reaching us – because, if the who will need to bear the costs of
claim hasn’t been rejected putting things right if we decide
outright, people typically in their customer’s favour.
complain only after the insurer
has tried to carry out repairs.
14horizon one
our performance At the same time, because
we’ve received fewer PPI
and finances complaints, we’ll resolve fewer
Currently, our measures of complaints than we set out in
our plans. Reflecting revised front line complaints
customer satisfaction – which
cover both people who’ve PPI complaints volumes, we’ll to firms up 10%
complained to us and the receive less income – and complaints to us up
businesses involved – are the costs of resolving PPI
broadly in line with the aims we complaints will also be lower.
22%
set out in our commitments. As we explained in our plans for
However, we’re mindful that the year ahead, we’ve continued
the general increase in demand to draw on our reserves. Our
for our service will continue to current level of reserves is partly all complaints, Jan to Jun 2018
compared with Jul to Dec 2017
put upward pressure on the a result of previously charging
time people need to wait for our a supplementary case fee for
answer, and our ability to reach PPI complaints – with the aim
the standards set out by the of using these funds to help us
Directive on Alternative Dispute scale up our PPI operations, to
Resolution (ADR). help wind it down, and to get
our service ready for a future
To ensure we’re prepared to when PPI doesn’t dominate our
handle an ongoing increase casework.
in demand, we’ve needed to
change our plans – and build
up our case handling capacity
in 2018/2019 in a way we hadn’t
initially planned for, diverting
resources into recruitment and
training.
comparison
2018/2019 2018/2019 with
financial summary
budget latest forecast 2018/2019
budget
£m £m £m
operating income 230.4 227.1 -1%
operating expenditure 289.8 285.2 -2%
operating deficit 59.3 58.1 -2%
15horizon one
developing our In the next chapter, we’ve Phoenix. Once launched, this
explained in more detail how we new option for communicating
service plan to manage these two new and sharing information will
jurisdictions. For the remainder create a more convenient service
preparing for new jurisdictions
of 2018/2019, we’ll continue for people who want to refer
The model of alternative dispute our preparations to ensure complaints to us – as they’ll be
resolution we’ve used for nearly we have appropriate people, able to share information with
20 years – free and informal, infrastructure and governance us securely and check on the
but with legally-enforceable arrangements in place to fulfil progress of their case without
decisions – is seen as good our responsibilities effectively. needing to contact us.
practice both in the UK and Our work to date has included:
In progressing our IT projects,
internationally. Recognising
• engaging with relevant we’ve been factoring in relevant
the benefits of this approach,
stakeholders to discuss the requirements relating to the new
Parliament and the FCA have
regulatory rules for the two types of complaints we expect
this year finalised proposals to
jurisdictions, and transferring to be dealing with from April
extend our jurisdiction. From
and building case handling 2019. Before the proposed start
1 April 2019, more small and
knowledge and experience. of these new jurisdictions, we
medium-sized enterprises will
plan to launch two microsites
be able to complain to us about • considering options relating
relating to our work helping
financial providers. The FCA to the practical delivery of SMEs and customers of claims
will also be regulating claims these new parts of our service management companies.
management companies from – including their resourcing,
this date, taking over from the location and technology building knowledge,
Ministry of Justice – and we’ll requirements. sharing insight
be able to look into complaints
made by their customers, • planning for the internal We’ve explained in previous
which was previously the and external recruitment of plans how our knowledge tools
responsibility of the Legal suitably experienced people and networks are fundamental
Ombudsman. to lead our new areas of work, to the investigation model we
as well as for skilled case launched in 2016 and have been
handlers. embedding over the last two
years. These structures, drawing
210,000
digital and IT on the experience of our internal
In line with the plans we set out subject matter and knowledge
at the beginning of 2018/2019, experts, help us maintain levels
more SMEs will have we’ve continued to develop of quality and consistency – as
access to the ombudsman our IT and digital capabilities. well as the ability to identify
This has included continuing to trends – as our case handlers
service from April 2019 each deal with more areas of
develop our new case handling
Read more about our SME plans on tool, Phoenix, with frequent complaint, helping us respond
page 25 and 26 flexibly to demand.
testing to ensure a smooth
changeover from our existing The quality of our answers
system. We’ve been piloting our is fundamental to our
new system with businesses stakeholders’ confidence
so they can adapt their own in us – and to our ability to
operations in anticipation of the play our part in promoting
launch. confidence in financial services
The development of our new more generally. The changes
portal technology is necessarily we’ve made to our operating
linked to the development of model have been accompanied
16horizon one
by significant investment in through our technical advice Our stakeholders have told us
our people’s knowledge and helpline. how much they value the insight
skills, as well as in processes we share in this way, together
that ensure the quality and We’ve also published regular with our regular published
consistency of our answers. insight into the complaints complaints data. As we look
In response to previous we’re seeing – to help financial ahead to the financial services
consultations, our stakeholders businesses resolve complaints landscape of the future, we’ve
have been clear that we should fairly without our involvement, been reviewing the way we
continue to invest in this way. and to prevent problems categorise complaints, as well
arising in the first place. This as improving our management
We’ve been careful to ensure has included highlighting the information tools. These changes
that more complex cases, complaints we’ve been receiving – which we’ll continue to discuss
as well as those involving from people unhappy with the with relevant stakeholders –
emerging issues, are able to rising cost of their insurance. will help us ensure our data
be identified and investigated and insight are as meaningful
by case handlers with the In August 2018 we shared our
insight into the complaints as possible for the purpose of
necessary specific expertise – managing our own operations, as
and continue to evaluate how we receive from people who
things are working to ensure believe they’ve been the victim well as for external parties who
of banking fraud – explaining rely on it. We ask more questions
people can rely on our answers. about our early insight work in
This balance of flexibility and to businesses that it wasn’t
fair simply to assume scam chapter three.
knowledge has also been at
the forefront of our plans for victims had been “grossly
managing our new jurisdictions, negligent”, and at the same
which we’ve explained in more time highlighting how people
depth in the next chapter. can help protect themselves
from being scammed. And in
In 2018/2019 we’ve also October 2018, supporting our
continued to engage with ongoing engagement with the
stakeholders to share our financial advice sector – which
experience, to hear their we expanded further following
perspectives on complaints the 2016 Financial Advice
and to explain the work we Market Review – we provided
do. This has included meeting clarity around our approach to
a wide range of stakeholders complaints involving defined-
face to face – including benefit pensions transfers,
financial businesses and in the form of detailed case
trade bodies, charities and studies and commentary.
consumer representatives,
other ombudsman schemes questions
and regulators – running our
own events, and visiting forums What’s your perspective on the trends we’ve
and networks across the UK. 1 highlighted?
We have also maintained
regular operational contact
with businesses and CMCs – Are there other trends you’re seeing, or any insights
working together to identify 2 you have, that you think we should take into account in
and address trends and issues our plans?
in our casework – and to offer
free, informal support to people What do you think about our projections for the
on the front-line of complaints 3 volumes of complaints we’ll see up to 31 March 2019?
17horizon two
2 horizon two
our plans and budget for 2019/2020
and forward look to April 2021
In this chapter we set out our plans for the next
financial year, 2019/2020, and the budget we
expect to need to carry them out. We explain
how we propose to deal with growing and volatile
demand in our existing areas of casework – looking
further ahead to the end of PPI. We also detail
our plans for managing two new jurisdictions:
complaints made by small and medium-sized
enterprises (SMEs), and complaints made about
claims management companies (CMCs).
18horizon two
our 2019/2020 plans at a glance
we expect to
receive operate on a
cost base of
460,000 complaints £332.2
million
250,000 50,000
about PPI about short-term lending freeze our case fee at
160,000 1,600
£550
for the 26th and each
about other financial about claims management subsequent complaint
services companies
1,300 resolve
continue to
draw on our
from small businesses
now able to use our 510,000 reserves
service
in line with
complaints our long-term
strategy
raise £45 million through our compulsory jurisdiction levy
19horizon two
volumes of complaints about short-term lending
3,000
2,500
complaint volumes
2,000
1,500
1,000
500
0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020
high volume scenario low volume scenario actual forecast
volumes of complaints about PPI
600,000
500,000
400,000
new cases
300,000
200,000
100,000
0
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021
actual previous central higher volumes lower volumes new central
assumption assumption
volumes of complaints about banking and credit, potential volumes of complaints about CMCs
insurance, and investments and pensions (our and from SMEs in 2019/2020
general casework)
18,000 CMC
16,000
14,000
1,600 900
12,000
number of cases
10,000
potential additional cases
8,000
SME
6,000
4,000
2,000 1,300 600
0
Mar Mar Mar Mar Mar Mar Mar
2014 2015 2016 2017 2018 2019 2020 potential additional cases
actual forecast
20horizon two
overall picture trends we identified – growing
demand for our help, and
In the previous chapter, we set volatility in that demand – to
out the trends we’re currently be reflected in our workload in
seeing in our casework – and 2019/2020. At this stage, we’re
some of the issues we think forecasting to receive around
might have, or continue to have, 13% more complaints – and to
a bearing on our workload over resolve 34% more – compared
the next year. We expect the key with 2018/2019.
new complaints
2019/2020
2019/2020
2018/2019 2018/2019 comparison with
financial product or service consultation
budget latest forecast 2018/2019
budget
forecast
PPI 220,000 200,000 250,000 25%
general casework including 130,000 145,000 150,000 3%
banking and credit (except
packaged bank accounts and 74,900 90,500 94,500 4%
short-term lending)
insurance (except PPI) 40,000 40,000 41,000 3%
investments and pensions 15,100 14,500 14,500 – 0%
total complaints from SMEs
n/a n/a 1,300 n/a
(included in general casework)
packaged bank accounts 10,000 12,000 10,000 17%
short-term lending
20,000 50,000 50,000 – 0%
(payday and instalment loans)
complaints about claims
n/a n/a 1,600 n/a
management companies
total 380,000 407,000 460,000 13%
21horizon two
resolved complaints
2019/2020
2019/2020
2018/2019 2018/2019 comparison with
financial product or service consultation
budget latest forecast 2018/2019
budget
forecast
PPI 250,000 230,000 270,000 17%
general casework including 130,000 120,000 180,000 50%
banking and credit (except
packaged bank accounts and 74,900 76,200 113,600 49%
short-term lending)
insurance (except PPI) 40,000 33,500 47,800 43%
investments and pensions 15,100 10,300 18,600 81%
total complaints from SMEs
n/a n/a 1,300 n/a n/a
(included in general casework)
packaged bank accounts 10,000 12,000 10,000 17%
short-term lending
20,000 20,000 50,000 150%
(payday and instalment loans)
complaints about claims
n/a n/a 1,600 n/a n/a
management companies
total 410,000 382,000 510,000 34%
As a demand-led service, we’ve As we explained in the previous As the UK approaches its
always needed to account for chapter, we’re also setting our planned date for leaving
uncertainty when we’re setting plans for 2019/2020 against the European Union, we’ve
our plans and budget. And a backdrop of rising demand, continued to engage with HM
maintaining and building our which could have a growing Treasury and the FCA about the
capacity to respond quickly impact on our ability to resolve impact on financial services
and flexibly to emerging and complaints as quickly as people regulation, and with financial
sometimes mass-scale issues need and expect us to. And in businesses about their own
is increasingly important. For the two single largest areas of preparations and projections.
example, as growing numbers our work – PPI and short-term
of people use financial services lending – we’re facing particular
exclusively online, IT problems uncertainty around the volumes
such as those we’ve seen of complaints we might receive
over recent years may affect in the future.
more people at once. And as
technology underpins even At the same time, we’ll be
more aspects of daily life – with taking on two significant
different platforms and services additional areas of work, with
interacting with each other our jurisdiction extending from
behind the scenes – the impact April 2019 to complaints made
on individual people may also by SME customers of financial
be more complicated to unravel, services, and complaints
fully understand and put right. made by customers of claims
management companies.
22horizon two
PPI and short-term able to resolve them – are accepted due to exceptional
still dependent on the factors circumstances.
lending – managing we outlined in last year’s
So the second horizon of our
uncertainty consultation:
strategic planning includes, but
In August 2017, the FCA • H
ow well businesses manage necessarily goes beyond, the
launched its PPI awareness their operations and answer next financial year – taking us
campaign, and set a complaints PPI complaints in a timely through to the end of the time
deadline of 29 August 2019. As way. when we’ll no longer be dealing
we explained in the previous with PPI complaints on such a
• How well businesses apply large scale, which will be around
chapter, we haven’t yet seen PPI
the relevant rules and April 2021.
complaints referred to us in the
guidance, apply our well-
high volumes it was expected
established approach on their At the same time as dealing
we might have at this stage –
own front line, and satisfy with the challenge of PPI – and
and have revised downwards
their customers they’ve got preparing for uncertainty before
our projections for incoming
a fair answer about their PPI its conclusion – we’ve seen a
complaints in 2018/2019.
complaints. sustained rise in complaints
Currently our uphold rate for PPI
about borrowing and debt. In
complaints is 30% – down from • How far claims management
particular, we’ve needed to
90% at its peak – reflecting the companies – who are respond to a significant year-
way businesses have factored involved in around eight in on-year increase in complaints
our approach into their own ten PPI complaints – pursue about short-term lending:
front-line complaints handling. complaints through our payday and instalment loans.
service, even where it’s clear
FCA data for the first half of
they won’t ultimately be However, as we highlighted in
2018 shows a rise of 11% in
upheld. chapter one, one of the largest
PPI complaints being made to
payday lenders, Wonga, went
financial businesses – bringing • How far businesses and into administration in August
them to their highest level in claims management 2018. As a result, we couldn’t
more than a decade. While companies cooperate with take forward the complaints
there’s considerable uncertainty us in sharing information its customers had already
about how many more PPI we need, to the quality we referred to us – and haven’t
complaints might be made expect, so we can settle their been able to take on any new
as the deadline approaches, customers’ complaints. complaints, directing customers
we think it's sensible to make
As usual, there will also be a instead to the administrators.
our plans based on a central
lag between PPI complaints The possibility remains that
assumption that we could
being made and reaching our further lenders will experience
receive 250,000 complaints in
service – as businesses have difficulties. So there’s a
2019/2020. However, it’s not
eight weeks to give their final risk that, if we scale up our
certain how many people will
choose to raise concerns about response, and their customers operations in view of current
PPI, or at what stage before the then have six months to contact trends in complaints volumes,
us. For example, a complaint we won’t ultimately need all
deadline they’ll do so. We plan
the capacity we’ve built, as
to continue to use our contractor made on the day before the
deadline, 29 August 2019, we won’t be able to look into
workforce to ensure we can
could be referred to us until complaints about businesses
respond flexibly to demand,
April 2020 and still be in time. that aren’t trading.
including any short-term peak
we might see. We’ll then need to investigate
and resolve these complaints
The volumes of complaints – and may still be receiving
that require our involvement complaints made after the
– and how efficiently we’ll be deadline, but which have been
23horizon two
Our current view is that it’s
appropriate to invest in December 2018
more capacity in 2019/2020.
Not doing so would risk we’ve resolved
1.9 million
compromising our ability to
respond quickly to complaints.
Given the proportion of uphold rate 30%
our current and expected PPI complaints since
caseload involving borrowing,
a significant number of
April 2010
people contacting us may be
March 2018
in vulnerable circumstances
1.7m
– and we’ll continue to focus
on identifying and supporting uphold rate 36%
people in these situations. (excluding cases affected by Plevin)
We’d welcome your own analysis
of the risks we’re balancing. We March 2017
explain later in this chapter the
bearing we think our proposed
response will have on our 1.4m uphold rate 52%
2019/2020 budget.
March 2016
1.3m uphold rate 66%
March 2015
1m uphold rate 62%
March 2014
670k uphold rate 66%
March 2013
280k uphold rate 65%
March 2012
180k uphold rate 82%
March 2011
60k uphold rate 66%
24horizon two
handling complaints published its near-final rules We set out below how we expect
and guidance. The FCA's final to run our SME operations from
made by small rules confirm that from 1 April 1 April 2019. Before then, we’ll
and medium-sized 2019 our jurisdiction will be continue to engage with parties
extended to complaints made representing the interests of
enterprises (SMEs) by: SMEs, as well as with financial
We’re currently able to look providers involved in the
• SMEs with an annual turnover SME market.
into complaints made by very
below £6.5m, and fewer than
small business customers of
50 employees or an annual
financial services, as well as
balance sheet below £5m;
from certain small charities
and trusts. Under the current • c harities with income up to
rules, to be eligible to use our £6.5m and trusts with net
service, businesses must have assets up to £5m; and
fewer than 10 employees and
an annual turnover or balance • individuals who act as
sheet of €2 million or less, in personal guarantors for loans
line with the EU definition of a to businesses they’re involved
“microenterprise”. in.
In each recent financial The FCA has estimated that
year we’ve received around these changes will mean an
4,000 complaints from additional 210,000 additional
microenterprises. Our insight UK SMEs will be eligible to
report into these complaints, complain to us. And to ensure
published in 2015, identified we can provide a sufficient
that, in many cases, these level of redress, the FCA is
very small businesses had no consulting until 21 December
access to legal or accounting 2018 on plans to set our award
support – and had little limit at £350,000, rising from
or no greater knowledge the £150,000 it’s been since
than individual personal 2012. This limit represents
customers when it came to the maximum amount we can
financial services. In 2015, make a financial provider pay
in light of the mistreatment if we decide their customer has
of small businesses by some unfairly lost out, but we can
large financial providers, the recommend they pay more. The
FCA began to ask for views new limit would apply to all
on whether access to our complaints we handle, rather
service should be extended – than only those referred to us by
recognising that, given small SMEs – and be adjusted each
businesses’ often limited year in line with the Consumer
resources, taking financial Prices Index.
disputes to court wasn’t an
option.
In 2017 the FCA opened a formal
consultation on SMEs’ access to
redress, put forward proposed
rules and guidance in January
2018, and in October 2018
25horizon two
our proposed SME operating model
e will have dedicated specialist teams dealing with complaints referred to our service by SMEs.
W
We’ll begin on 1 April 2019 with four teams – which, in line with our investigation model, will be
led by a specialist ombudsman leader and made up of specialist ombudsman managers and
investigators. We are currently recruiting for these teams – which will have the expertise and
experience required to resolve the widest range of disputes that SME customers may bring to
us, including those involving more complex circumstances than we typically see in our current
microenterprise casework.
ur specialist teams will use a range of dispute-resolution approaches. This will include more
O
formal mediation, and we will also look to resolve more complaints at an early stage – recognising
that, even where a dispute-resolution service is free and accessible, being caught up in a
protracted financial dispute can be a significant drain on an SME’s resources, as well as being
stressful and frustrating for the people involved.
e will have a specialist professional practice group to develop our service’s approach to
W
complaints involving SMEs. This will help us ensure fairness and consistency in our answers, as
well as identifying trends and insight to feed back to financial providers and other stakeholders.
n external expert panel will provide additional support, knowledge and sector insights to our
A
specialist teams.
ur teams will also have access to additional legal and actuarial support, which they will be able
O
to draw on in the event of particularly complex complaints and circumstances.
e will have in place a robust quality assurance framework specifically for SME complaints
W
– comprising front, second and third line assurance involving our specialist ombudsmen and
practice group, independent quality specialists and executive and non-executive directors.
e will use enhanced analytics tools to monitor customer service trends, to help us ensure
W
consistency across both our casework approach and our level of service.
e will have developed our technologies to enable efficient handling of SME complaints – using
W
our customer-centric case handling system to provide a flexible and personal service, and
developing decision-making tools to ensure jurisdiction thresholds are applied correctly.
e will have a distinct identity for our SME work, including a separate microsite, online resources
W
and dedicated phone line for SME customers – providing clear distinction between this area of our
jurisdiction and our existing consumer jurisdiction.
We will only be able to consider complaints made by SMEs about acts or omissions that take
place after the new rules come into effect on 1 April 2019. We currently think we will receive
approximately 1,300 complaints from SMEs in 2019/2020. We’d be grateful to hear further
perspectives on our volume expectations and our operating plans in response to this consultation.
26horizon two
handling complaints this work would be recovered –
including its intention that the
about claims same funding arrangements
management that currently apply to regulated
companies (CMCs) financial firms will apply to
CMCs. Because we and the
In 2015 the Government FCA share responsibility for our
commissioned an independent funding arrangements, we and
review of the regulation of the the FCA consulted jointly on the
claims management sector. part of the proposals relating to
Following this review, it was funding our own work.
proposed that the regulation of
claims management companies We’re particularly mindful of the
(CMCs) be transferred from need to ensure there’s no real
the Ministry of Justice’s Claims or perceived conflict of interest
Management Regulator (CMR) to arising from our handling
the FCA – and that responsibility complaints about CMCs, while
for resolving complaints about also engaging with them
CMCs be transferred from elsewhere in their capacity as
the Legal Ombudsman to our representatives of consumers
service. This arrangement who’ve brought complaints to
was confirmed in the Financial us about financial businesses.
Guidance and Claims Act 2018. This clear segmentation will
be a central feature of our
In June 2018 the FCA consulted operating model. We have
on the rules that would apply already begun to prepare for
to CMCs, and in August it this new area of work, and have
consulted on how the costs of set out our plans on page 28.
27horizon two
our proposed CMC operating model
e will run our CMC operation from our Coventry office – creating a geographical, as well
W
as operational, separation from other areas of our work in which CMCs may be involved as
representatives.
We will have transferred CMC case handling knowledge from the Legal Ombudsman, so we can
benefit from existing expertise relating to the issues involved in these complaints. CMC cases that
are open with the Legal Ombudsman at the point our responsibilities begin will transfer over to our
service.
e will have in place additional processes to mitigate the risk of real – or perceived – conflicts of
W
interest, in addition to our existing conflicts of interest policy, which applies to all our employees
across all areas of work.
e will have a specific customer journey for people complaining to us about CMCs, from their
W
first contact with us through to an ombudsman’s final decision – mirroring, but separate to, our
existing casework process.
e will engage with CMCs in early 2019 in conjunction with the Legal Ombudsman, helping
W
clarify future arrangements and expectations to ensure a smooth handover of complaints.
e will have developed our technologies to enable efficient handling of CMC complaints within
W
our customer-centric complaint-handing tool – while ensuring appropriate separation from other
areas of complaint.
e will have a distinct identity for our CMC work, including a separate microsite and online
W
resources, providing clear distinction between this area of our jurisdiction and others.
e have consulted jointly with the FCA on proposals for funding our CMC work, and set out later
W
in this chapter how we plan to resource our service, including our CMC jurisdiction, in 2019/2020.
We expect to receive 1,600 complaints about CMCs in 2019/2020 – and in addition, expect to take
on a number of unresolved complaints from the Legal Ombudsman. Before April, we’ll continue
to engage with relevant stakeholders – including the FCA, the CMR, the Legal Ombudsman, CMCs
and financial providers – about our plans for resourcing and running this new jurisdiction. We’d
welcome further views in response to this consultation about our projections and proposals for
CMC complaints.
28horizon two
developing and • R
efining our investigation funding our service
model, with a particular focus
resourcing our on building our people’s in 2019/2020
service in 2019/2020 knowledge and strengthening In last year’s consultation,
our quality assurance we explained that, given
We explained in chapter 1 processes – both in our
that we’ve needed to divert the progress of our change
existing and new jurisdictions. programme and the work still to
resources in the current financial
year to handle growing demand • Ensuring we meet, and be done before PPI was finally
for our help – and there’s no will continue to meet, the resolved, we didn’t think it was
indication the trends we’ve expectations of everyone the right time to fundamentally
identified will slow or reverse in using our service – including change our funding model.
the coming year. improving communications We still think that’s the right
about our processes, and approach for 2019/2020, and
At the moment, we’re developing the digital so propose to keep our model
maintaining levels of customer capabilities outlined in the unchanged.
satisfaction in line with our previous chapter.
strategic commitments. For the next year we propose to
However, keeping our service • Making sure we learn from freeze case fees at their current
resourced at its current levels our experience of change levels, and keep our 25 “free”
will put sustained pressure by listening to our people’s case fee allowance. While we’re
on our ability to investigate feedback – and strengthening still maintaining higher than
and resolve complaints as our employee engagement normal levels of reserves, our
quickly as the parties involved structures to ensure our long-term strategy has been
need and expect. A further employees understand our to use our reserves to fund our
implication of this will be that, current strategy and can PPI operations – to help set it
while we’ll continue to meet contribute to developing our up, to manage the costs of our
other requirements, we’ll find it future strategy. casework and eventually to
increasingly difficult to meet the wind it down, and to make the
• Building on our existing changes we need to deliver our
timeliness standards of the ADR
complaints-prevention service when we’re not dealing
Directive. As we’ve highlighted,
work, supported by new with PPI in such high volumes.
we need to carefully weigh up
management information In 2019/2020 we propose to
the risk of “stranded costs”
tools and insight structures. fund the investments we plan
against the risk of significant
delays. to make in our service through
At the same time, we will be
increasing our compulsory
investing in and running two
Our 2019/2020 resourcing jurisdiction levy.
significant new jurisdictions.
plans and budget will also
And we’ll need to continue to The rest of this chapter explains
need to account for our
manage our PPI casework – our 2019/2020 financial plans
ongoing programme of change
ensuring we’ve got sufficient in more detail, and the draft
– including the investment
resources to handle any spike FEES instrument is included as
we’re making in responding
in complaints, before gradually appendix a. In chapter four, we
comprehensively to the
winding down our operations, outline the engagement we’ve
recommendations of Richard
with associated costs. already carried out to hear
Lloyd, which our board accepted
in July 2018. In summary, we will stakeholders’ views about our
be: funding – and ask for feedback
about the options we should
consider to ensure our model
remains fair and sustainable.
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