The FCA’s complaints data names and shames the wrong people

A few days ago, I lamented in this blog about how little use the FCA's complaints statistics can be for consumers. Today's latest release of data from the FCA illustrates my point very well. In its press release, it lists the companies with the highest number of complaints in each sub-sector, but does nothing to put this in context for consumers.

I feel a little sorry for the likes of Nationwide and Cheltenham & Gloucester who are two of the brands that are singled out in the home credit category. Both companies are large, and the data gives us no idea how many complaints each of these companies receives per customer. But the implication is clear - here are two companies that are amongst the worst when it comes to looking after their customers in the home credit market.

In fact, if you take a look at the Financial Ombudsman Service stats - which provide a much better proxy for how good providers are at handling complaints - both companies see a fairly low percentage of complaints upheld. C&G is one of the best in the market, with just 16% of complaints being upheld in the customer's favour during the last six months of 2013.

While the FCA press release says that publishing complaints data can help to drive up standards, I'm not sure that I agree with it. Nationwide is one of the largest lenders in the UK, so is likely to always appear in the top five for complaints. That doesn't mean it's doing a bad job. Instead of driving up standards, the FCA data in its current form unfairly penalises some companies that are doing a perfectly good job.

Upward trend

The one thing the FCA data is useful for is showing overall trends in complaints. As the graph below shows, the number of complaints in the financial services industry is still going in the wrong direction. If you take out the spikes caused by PPI and overdraft charges, there is still an underlying upward trend. And it's worth remembering that the time period we're looking at here is the period following the worst financial crisis in living memory - something that should have been a humbling experience for banks and insurers, but which doesn't seem to have changed the culture in the industry in the slightest.

Although the 2.5 million complaints seen in the second half of 2013 is an improvement on the near 3 million seen in the first half, banks and insurers are still generating a complaint every six seconds. The only industry that makes them look good is the energy market, where the numbers are even worse.

Complain then switch

If the culture in the financial services industry is going to change, customers need to lead the revolution. If every one of the 2.5 million complainants had picked up their business and taken it elsewhere, it may have caused companies to sit up.

Sadly, too many people think that all banks and insurers are the same. But as our tables show, they are not. Only when we start rewarding the companies that invest in good service are we going to give the poorer performing companies a real incentive to up their game.