Lending Complaints Up Sharply, Says Scheme

31 March 2022

Complaints to banks about lending-related matters rose sharply in the last three months of 2021, according to data published today on the Banking Ombudsman Scheme’s complaints dashboard.

The data shows complaints about home loans and credit cards rose 24 per cent and 19 per cent respectively between October and December 2021 compared with the previous three months. Complaints about long waiting times for a loan decision were up 62 per cent on the previous quarter, while complaints about declined applications were up 22 per cent.

In total, banks received 24,206 complaints during the quarter, up 3 per cent on the previous quarter. Of these, 12 per cent were about what customers considered to be banks’ failure to follow through on agreed action, and this was particularly so in lending-related matters.

The dashboard, launched in August 2020, combines data about the problems customers report to their banks, and the scheme uses the results to identify trends and help improve banking. The dashboard can be found here.

Banking Ombudsman Nicola Sladden said she was not surprised by the increase because it coincided with the introduction of amendments to the Credit Contracts and Consumer Finance Act 2003, which require lenders, among other things, to scrutinise customers’ expenses more closely when assessing loan applications.

"We knew some customers wouldn’t be happy about this greater level of scrutiny - or the resulting longer processing times.

"We issued a guide in October to help customers prepare for the changes, but many would still have been caught by surprise."

Ms Sladden said the tightening of loan-to-value ratios and an increase in interest rates during the quarter were also contributing factors to the spike in lending-related complaints.

In November, the Reserve Bank halved the amount of low-equity lending banks were able to provide, leading some banks to withdraw or modify pre-approvals issued to borrowers with deposits of less than 20 per cent.

The scheme also received more lending-related complaints between October and December, with a doubling of concerns about delays and banks not acting as promised, as well as a significant increase in concerns about unfair fees and rates.

While complaints about financial hardship have declined, heightened consumer vulnerability from the effects of the pandemic, coupled with the rising cost of living, could drive more complaints this year. Ms Sladden said she encouraged customers struggling financially to seek help early on from their bank. They could also try the free and confidential MoneyTalks service. The scheme has a Quick Guide on hardship and financial difficulty.

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