Levels of financial complaints will stay at record levels as long as economic conditions remain difficult, warns the Financial Ombudsman.

The Financial Services Complaints (FSCL), a Financial Ombudsman Service, reported complaints were up by 6% to 1426 in the year to June 30.

New disputes received (cases the service formally investigates) rose by 10% to 359.

“The steady increase in complaints reflects the challenges in the wider economic environment,” Susan Taylor, Financial Ombudsman, said.

“We expect this high level of complaints to persist as long as economic conditions remain difficult.

“Although the pace of growth has slowed this year, all our numbers – complaints and disputes – were new records for our service.”

The service started in 2011.

Taylor expected new rules increasing the maximum financial loss compensation from $350,000 to $500,000, which took effect this month, could also lead to a further rise in those figures.

The increase means more consumers can have their disputes resolved without going to court.

Complaints about lenders made up the greatest proportion of complaints investigated, the FSCL said.

This came from people continuing to struggle with managing loans, particularly car, personal and small business loans.

Figures from credit bureau Centrix show the number of consumers falling behind on payments increased by 16,000 in May to 474,000 people in arrears, or 12.64% of the credit-active population.

Arrears are tracking 8.2% higher year-on-year.

Auto loan and personal loan arrears improved in May to 5.5% and 9.2% respectively of active accounts past due. But buy now pay later arrears rose slightly to 8.8%, Centrix said.

The FSCL said of the cases formally investigated, the largest proportion of complaints were about consumer credit products (29%), followed by credit cards (14%) and mortgage loans (11.5%).

Complaints against financial advisers (18%), insurers (14.5%) and card issuers (14%) were also up in numbers on last year.

Common issues reported to the FSCL were around financial hardship, miscommunication, fraud and scams, and business loans.

“Under the Credit Contracts and Consumer Finance Act 2003 lenders must consider hardship applications from borrowers whose financial circumstances have unexpectedly changed and offer temporary relief, but not if borrowers cannot resume payments,” Taylor said.

“It’s important for consumers to contact their lender or financial service provider as soon as they experience hardship or have a complaint as the earlier this is done, the quicker it will likely get resolved. If it can’t be resolved with the financial service provider, then they can bring the complaint to us.”

Taylor said miscommunication was also central to many complaints the FSCL investigates.

“This can include breakdowns in passing on important information, poor understanding of clients, and ambiguous or poorly worded communication,” she said.

“I’m pleased to report, we’re starting to see an increasing number of our financial service providers just ‘doing the right thing’ by concentrating on a fair outcome for their clients and customers.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.