People who go to one of the UK’s main customer complaints bodies for help are being “misled” about their chances of success because it is inflating the number of cases upheld in favour of consumers, an academic study claims.

Researchers from Warwick University say they have uncovered “some very concerning practices” at the Financial Ombudsman Service (FOS) relating to how it handles complaints, and that the “genuine” customer success rate is a lot lower than the published figure.

But the FOS has hit back, saying it “strongly refutes the claims” and “does not recognise the findings”.

The FOS was set up by parliament in 2001 and is the main complaints-handling body for people who have a problem with a financial product or service – from bank accounts, mortgages and insurance, to loans, investments and pensions.

Each year more than a million people contact the FOS for help.

However, it has previously come in for criticism and currently has a rating on reviews website Trustpilot of 1.3 out of five, based on more than 1,700 reviews, which the site says is a “bad” score.

The research focuses on cases upheld in favour of the consumer. The FOS website says that, in 2023-24, across all products, it upheld 37% of the complaints it was asked to resolve.

However, researchers claim that, with many of those they looked at, the FOS sided with the business, rejected the substance of the individual’s complaint, and noted they would be disappointed with the finding, “with a sudden pivot to recording the judgment as an ‘uphold’ at the end”.

Researchers claim their analysis suggests that, rather than the advertised 37% figure, the “genuine” rate for upheld cases for 2023-24 was 24%, and considerably lower than that for some individual ombudsmen.

They examined a random sample of complaints classified as “upheld” between 1 May 2022 and 30 April 2023, and agree that two-thirds were genuinely upheld, but that, in their view, the remaining third were problematic.

They say that with these, the ombudsman essentially rejected the complaint and the customer’s claim for compensation, and ruled that either there would be no additional redress beyond that already offered or paid, or that just a “token” amount for distress or inconvenience, should be awarded.

“In such cases it is also often noted by the ombudsman that the complainant will be dissatisfied with the result, even though it is recorded as upheld,” says the study, adding: “Consumers are being misled about their chances of a substantive finding in their favour.”

It adds that the distress and inconvenience awards are often a lot smaller – typically between £50 and £300 – than the thousands that some people were seeking.

The study gives the example of “Ms B,” who complained that her insurer had unfairly withdrawn its offer to make a payout under her home insurance policy. She took legal action after suffering an injury while having a beauty treatment.

Her insurer initially said her policy would cover her claim if all else failed – but it later said it had made a mistake and that the claim did not meet the requirements of the relevant section of the policy.

The insurer offered her £100 compensation. However, Ms B argued it had made “a negligent misrepresentation” and, as a result, she had suffered “severe monetary loss”.

She went to the FOS, but its investigator did not uphold her complaint as they were satisfied the compensation was fair.

Ms B disputed this, so it was escalated to an ombudsman. But it ruled the claim did not fall within the policy cover and the insurer had made an error. It ruled the offer of £100 was fair and said it was all Ms B should get.

Despite all that, and with Ms B presumably very unhappy with the final verdict, the complaint is officially recorded on the FOS system as “upheld”.

Researchers say their findings were “concerning with regard to the credibility” of the reported uphold rate at the FOS, which is funded by the financial services industry, and they speculated on whether there was any “top-down institutional pressure to inflate the uphold rate”.

In response, the FOS says it does not recognise the findings, adding that during the year the study looked at, more than 85% of its cases – tens of thousands – were investigated and resolved informally by investigators who issued “views” to the parties involved that did not appear on its website.

The FOS says it is wrong to suggest that because a compensation award was similar to, or only slightly more than, the one offered by the business, the complaint should not be classed as an uphold.

A small amount of extra redress could make a big difference in some cases, and not all complainants are seeking money, it adds.

It also says it does not award people a small amount of redress and then class this as an “upheld” case – it is the other way around.

It adds: “We strongly refute the claims made by this research which looked at just 99 cases – less than 0.5% of our annual caseload – and fails to recognise that an answer from our service provides clarity to both consumers and businesses.

“Each year the FOS helps thousands of people settle disputes with businesses, awarding millions of pounds back in redress and compensation … While not everyone will agree with our findings, we are committed to providing answers which are fair and reasonable.”

• The Warwick University researchers are looking to do a more detailed analysis of FOS cases and complainants’ experiences. Those interested in potentially taking part can email FOS@warwick.ac.uk

Regulator’s caseload rockets

There’s been a huge surge in complaints from unhappy consumers about financial products and services, fuelled by a relentless rise in the number of people hit by scams.

Most recent data, from 1 April to 30 June this year, shows a 70% jump in complaints received by the Financial Ombudsman Service, compared with the same period last year. During just those three months, it received 74,645 new complaints.

Credit cards are the most complained-about category. Most cases taken to the FOS during this period involved irresponsible or unaffordable lending claims.

The second most complained-about product is motor finance, including personal contract purchase (PCP) and hire purchase. It has previously been claimed that millions of drivers could be in line for a payout if an official investigation rules that consumers have been unfairly charged inflated prices. Other products attracting a lot of complaints include current accounts and vehicle insurance.

At the same time, fraud and scam complaints have hit their “highest-ever level”, says the FOS. More than half involve “authorised push payment scams” tricking people into sending money to bank accounts operated by criminals.

On top of that, buildings insurance complaints have hit a 10-year high, fuelled by storm and flood damage.