Less than half of people are satisfied with the way banks handle complaints

Bank complaints handling continues to let down customers with less than half satisfied with the response that they receive, new research shows.

Some three quarters of customers with a grievance against their bank make a complaint but only 47% are happy with the response they receive, according to the report from Consumer Focus.

The banking industry in the UK attracted more than 1.25 million complaints in the first half of 2010 alone. The consumer watchdog found that despite being dissatisfied with the initial response from their bank, less than a third, 31%, of people then pursue the complaint further.

Of these people just 9% take their complaint to the Financial Ombudsman Service. This is despite evidence suggesting that if consumers do pursue their complaint they can receive a better result than they might expect.

Research on consumers who have used the Ombudsman service shows that nearly three-quarters feel it provides a fast and efficient service and that consumers receive compensation in half of the cases it reviews.

Consumer Focus is calling for banks to take complaints more seriously and devote more resources to improving customer service. The consumer champion is also urging the Financial Services Authority (FSA) to continue using the prospect of financial sanctions to keep the pressure on poorly performing firms. The FSA previously concluded that banks’ complaints handling is ‘poor’ with more than a third underperforming in this area.

‘Customers are willing and able to fight their corner and take the first step of complaining. The problem is they then seem to become disheartened by the banks’ poor service and complaints systems. Unfortunately, persistence appears to be the key to getting the answer you would like from your bank,’ said Oliver Morgans, financial services expert at Consumer Focus.

'These findings should be a wake up call for banks that must do more to improve their complaint handling practices. Decent customer service is a necessary part of a healthy market and a successful company. The evidence suggests banks are currently falling a long way short,’ he added.

Consumer Focus thinks that poor customer service and complaints handling is a sign of weak competition.  Banks should be using good customer service as one way to differentiate themselves from their competitors, to attract and keep customers and to learn more about how they are performing. Consumer Focus analysis of complaints data from the banks and the Ombudsman shows significant differences on customer service, with some banks performing much better than others.

If banks don’t raise their game when it comes to complaint handling, consumers should be able to take their custom elsewhere, it said. Despite the level of industry complaints, three quarters of customers have never even considered switching their current account to another bank. Fear of costs when things go wrong, the effort involved and fear of a negative effect on credit rating are key reasons why consumers are reluctant to switch.

Consumer Focus thinks that if switching was easier and people were more willing to vote with their feet, it would put power back in the hands of consumers, and put pressure on banks to make the market more competitive.

To improve complaint handling for bank customers Consumer Focus is calling for strong enforcement action by the FSA against poor complaint handling practices and for the unfair treatment of customers and for details of the Financial Ombudsman Service to be given when a consumer first registers a complaint, along with an update at four weeks if the complaint still isn’t resolved.

‘That way,’ it said, ‘customers know there is an independent third party if they are unhappy with the result and this may help motivate them to keep going with a long running complaint’.

It also wants changes to the publication of complaints data so that consumers know which banks are and are not performing. This would include FSA complaint data being broken down by banking products and always by High Street brand not parent company and complaints data being provided so it can be compared against a bank’s market share.

It adds that if the FSA also published how many complaints are resolved at four weeks it would enable consumers to see which banks have a good track record in resolving complaints quickly.