The number of disputes lodged with the Financial Ombudsman Service declined sharply last year. Between the March quarter, when FOS received 9590 disputes, and the December quarter, when it received 7677, there was a 19.9 per cent drop.The number of disputes accepted by FOS also fell - down 14 per cent throughout the course of the year. These figures are included in the latest issue of the Ombudsman's quarterly newsletter. There is no analysis of the trend.Lenders' dealings with customers in financial difficulty topped the list of systemic issues covered in the newsletter. Lenders are obliged to consider variations to repayment terms if customers are facing financial hardship, but it is a highly contentious area.In one case, the lender's policies and procedures for dealing with financial hardship included a requirement that there should be "reasonable cause" for the hardship.FOS found that the focus on reasonable cause was too strong and that the lender had to allow for the fact that some hardship resulted from poor choices or poor budgeting. FOS said it was not appropriate to have a prescriptive list of causes when assessing hardship requests. It also said it was inappropriate for the lender to make a rule that it would not give hardship assistance if it had done so on two previous occasions.FOS was also critical of the lender for referring decisions to approve hardship assistance to a mortgage insurer in cases where the loan was insured. In another case, FOS reviewed the practice of a lender that carried out direct debit transactions on a customer's account, despite having been told by the customer that the account did not have sufficient funds.FOS found that the lender did not have a documented hardship procedure in place at the time the disputed action took place and that it had not given genuine consideration to hardship requests. In a third case it found that a lender would not provide hardship assistance to one party in a joint debt if that party was estranged from the other party.