Complaints to the Financial Ombudsman Service last year reached record numbers, driven by a surge in disputes over unauthorised overdraft charges and payment protection insurance.
The FOS yesterday reported a 30 per cent jump in the number of new formal complaints it received in its 2007/2008 financial year to 123,089 - an all-time high in its seven year history. The hike in dispute numbers reverses the decline in complaints seen last year.
FOS chairman Christopher Kelly said: "This time last year we had hoped we were starting to see a downward trend in complaint numbers for the first time. But instead, events during the year have led to the ombudsman service receiving record numbers of new cases."
FOS said the number of enquiries received in 2007/2008 also set a new record, up 27 per cent on the previous year at 794,648.
Banking related disputes leapt in the first part of last year, fuelled by consumer anger at unauthorised overdraft charges.
The period between April and July last year saw a ten-fold surge in bank charge complaints - nearly 32,000 - as the High Court test case involving the Office of Fair Trading and eight current account holders unfolded.
But the ombudsman service has put bank overdraft charge complaints on hold from last July as it waits for the outcome of the High Court test case.
Payment protection insurance complaints also rose more in the first three months of 2008 than in the whole of 2007, making it the most complained about insurance product. Complaints about the controversial insurance, which covers repayments on credit cards and loans if the holder becomes unemployed or unable to work due to accident or illness, rose six-fold to 10,652.
PPI has attracted criticism that it is overpriced and has been mis-sold to people who would never be able to make a claim on their policy.
Which? magazine this week said a third of people who have taken out the loan payment protection insurance in the last five years may fall foul of claim criteria, affecting as many as two million policies.
The Competition Commission will deliver what is expected to be a highly critical report on the £5 billion a year industry later this month.
Most complaints to the ombudsman about PPI relate to how policies were sold rather than complaints about rejected claims.
Complaints to the ombudsman about motor and household insurance also rose last year.
But disputes about other financial products, such as health and travel insurance, were down six per cent and three per cent respectively and complaints about some investment products were down more than 50 per cent. Sir Christopher said: "The picture is mixed and the continued slowdown in the number of disputes referred to us about health insurance, travel insurance and some investment products is very welcome, especially where this follows specific initiatives by the industry sectors involved to improve standards of complaints-handling."
FOS said half of the disputes it handled re-lated to six of the UK's largest financial service groups, broadly reflecting the amount of business they do with customers.
Although most complaints were turned down, the majority of bank charge and credit card cases, 84 per cent and 79 percent respectively, were upheld.