Surge in complaints about motor finance commission seen by ombudsman service

The Financial Ombudsman Service said it received 68,430 complaints in general between October and December 2024, and complaint volumes in the current financial year remain significantly higher than in 2023/24

The Financial Ombudsman Service (FOS) has reported a surge in consumer complaints, primarily driven by issues related to hire purchase for motor vehicles, current accounts and credit cards.

The service recorded a total of 68,430 complaints between October and December 2024, marking a significant increase from the previous financial year. The FOS, which is responsible for resolving customer grievances against financial firms, identified hire purchase related to motor vehicles as the most complained-about product in the last quarter.

This rise was attributed to complaints about motor finance commission arrangements. Customers have voiced concerns about not being informed that car dealers would receive commission from the finance provider for arranging the finance, allegations of unfair arrangements, and claims that recommendations were influenced by commission.

Credit card complaints, making up around three-quarters of the total in the latest quarterly figures, were largely due to perceived unaffordable and/or irresponsible lending. Fraud and scams remain the primary cause of current account complaints, according to the ombudsman service.

In response to these issues, the Financial Conduct Authority (FCA) has initiated a review of historical motor finance discretionary commission arrangements. In a recent update, FCA has extended the timeframe for motor finance firms to resolve complaints related to commission agreements and for customers to approach the ombudsman, aiming to avoid chaotic and varying results. This move comes as part of a broader review by the FCA, which seeks to also consider pertinent legal judgments before proceeding further with any actions.

James Dipple-Johnstone, acting chief at FOS, remarked: “We are continuing to see high volumes of motor finance commission cases and would encourage businesses to consider whether complaints are covered by the FCA’s temporary complaint handling rules.”

He added on the difficulties posed by ongoing legal disputes, “Ongoing legal proceedings are impacting our ability to issue final decisions in these cases but we are putting steps in place to ensure we can resolve them as quickly as possible when we have the clarity we need.”

Here are the most complained-about products between October and December 2024 and the number of complaints received, according to the FOS:

1. Hire purchase (motor), 15,956

2. Credit cards, 10,957

3. Current accounts, 8,830

4. Car/motorcycle insurance, 3,660

5. Conditional sale (motor), 2,702