Consumer complaints about financial services reach record levels: OBSI

Date: Thursday, June 10, 2010
Author: Investment Executive

Complaints from bank and securities industry clients were up 48% in 2009, as it investigated 990 complaints, the Ombudsman for Banking Services and Investments (OBSI) said Wednesday.

This represents more than triple the number of case files OBSI handles over the past three years, it says. OBSI also processed over 12,400 individual inquiries from consumers and small businesses in 2009.

The ombudservice indicates that investment-related complaints made up about 60% of its case load -- 599 complaints came on the investment side, versus 391 banking cases. Investment complaints also increased at a much faster rate, driving the overall increase in complaint volumes. OBSI says that while banking sector complaints were up 21%, investment complaints were up “a staggering 73%”.

Consumers received compensation in 28% of cases reviewed by OBSI in 2009, it says, and their success rate was notably higher on the investment side, at 20% for banking complaints and 35% for investment complaints.

“The global economic crisis, coupled with sharp declines in financial markets, gave rise to much of the increase in complaints we saw,” said Douglas Melville, Ombudsman for Banking Services and Investments. “However, despite the improvement in the markets over the last year, complaint volumes remain high. We expect this to continue.”

“On the banking side, many of the complaints we saw dealt with mortgage prepayment penalties, rates on lines of credit, or fraud,” said Melville. “On the investment side, the vast majority of cases were related to the suitability of investment advice. Investment advisors need to fulfill their “know your client” obligations as well as explain the risks and characteristics of the products they are recommending.”