Exclusive: Lloyds and Barclays bleed millions in complaint fees
Lloyds and Barclays were among top UK banking giants paying millions to the Financial Ombudsman Service (FOS) in administrative fees in the last year.
The banking industry’s ‘Big Six’ – Barclays, HSBC, Lloyds Banking Group, Natwest, Santander and Nationwide – paid the FOS a combined £38.8m in admin fees for the year ending March 31.
Lloyds topped the list at £12.6m, with Barclays second at just short of £9m, official figures seen by Morning Wire show.
This came as the motor finance row, which Lloyds and Barclays have historical exposure to, dragged total complaints to the FOS to the highest levels since the PPI scandal.
Motor finance complaints jumped by near-500 per cent to north of 70,000 which triggered an over 50 per cent spike in the FOS’ total caseload to 305,726.
The Supreme Court is expected to give its verdict on whether it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent in the summer.
Lloyds leads the pack for deepest provisions at £1.2bn, with Barclays setting aside £90 and Close Brothers £165m
Analysts have warned the sector’s total payout for the scandal could top £30bn.
Santander, which has reserved £295m for car finance payouts, faced a surge in provisions in its first-quarter report in April. The Spanish-based lender recorded a 69 per cent increase to £140m for liabilites and charges.
The bank said £42m was driven by “charges relating to changes to our branch network”. The lender is set to close 95 branches this year.
Santander paid £5.14m in FOS admin fees for the financial year.
FOS faces crackdown
City minister Emma Reynolds has remained open to clipping the wings of the ombudsman after accusations the watchdog had become a quasi-regulator.
Reynolds told an audience of bankers and investors that the end of a review on the FOS could lead to a winding down of powers.
Banking officials have hoped the Chancellor will use the July 15 Mansion House speech to introduce a series of reforms to the sector, particularly around regulation.
The FOS introduced changes to its administrative fees system in April with it beginning to charge professional representatives £250 for each case referred to the FOS beyond the first ten cases per financial year.
The new system will also not charge banks for the first three complaints they receive in the financial year. From the fourth complaint forward a case fee of £650 is applied, but reduced to £475 if the complaint is dismissed, withdrawn, or abandoned, or if it is found to be outside the FOS’ jurisdiction.
Banking industry body UK Finance had previously sounded the alarm on the FOS fees system and said it opened the door to penalising firms “disproportionately, particularly in the context of mass-generated complaints driven by professional representatives”.
The FOS said around half of the complaints in the last year were brought forward by professional representatives, compared to a quarter previously. The regulator said the increase had mainly been focused on credit affordability and car finance complaints.