The scheme details case studies of irresponsible lending
The Insurance & Financial Services Ombudsman Scheme has reported 3,922 enquiries over the past year and has investigated 282 complaints, according to its 2019-2020 annual report.
64% of all enquiries in 2019-20 were about general insurance, 14% were related to life, health and disability policies, 12% were related to loans or credit contracts and 4% were about financial advisers. The IFSO Scheme also received 230 COVID-19 related enquiries as of 30 June, and IFSO Karen Stevens says this highlights the growing need for access to free and independent advice.
The IFSO Scheme accepted 22 complaints regarding loans and credit contracts in the 2019-2020 period - up from 12 in the previous year. The number of accepted complaints about financial advisers also increased from 3 to 12.
IFSO Karen Stevens says misunderstandings and miscommunication were “the most common complaint themes,” and that good communication is vital in the current environment of hardship.
“Communication and transparency are even more important in the current climate,” Stevens said.
“During the COVID-19 lockdown, insurers responded quickly with a range of proactive options for customers, particularly for those facing hardship. Credit contract providers also acted quickly to restructure loans, defer payments and waive fees.”
IFSO has published a series of example complaints in its latest report, including a credit contracts complaint involving a customer supporting a high-needs child on a benefit who arranged four loans, and could not afford to make repayments. The customer was charged multiple fees and issued with a repossession notice, leading to an irresponsible lending complaint from a community lawyer. The lender was not able to prove that it was lending responsibly to a vulnerable borrower, and the debt was written off.
Stevens says that case studies contain lessons “for both the consumer and the industry,” and urged customers facing difficulty to ask for assistance when needed.
“The aim is to help consumers understand their options and their responsibilities, so they can make informed choices,” Stevens said.
“Perhaps the most important tip is to keep asking questions until you understand, and always ask for extra assistance if you need it.”
Commenting on the 2020 report, IFSO Scheme Commission Chair Sue Suckling said that the COVID-19 pandemic has “highlighted the strength of collective action” and flexibility, and the IFSO Scheme will be playing a vital role in “building confidence and trust” and ensuring that the interests of consumers are being looked after.
“The emphasis on conduct and culture set the scene for a proactive response to financial hardship and vulnerability,” Suckling said.
“Insurers and financial service providers responded quickly under pressure, operating during lockdown, and putting a range of measures in place to increase customer support. In this climate, access to a free and independent dispute resolution service is even more vital.”
“Our strategic goals involve embracing technology to enable and build relationships,” she added.
“The best way to create a more responsive and accessible service is together with the industry. We have responded to the changing needs of our participants and their customers with initiatives to improve access, information and resources.”