Vanquis and Barclays lead surge in bank complaints amid motor finance
Banking complaints rocketed by 76 per cent in the second half of 2024 as the motor finance scandal continued to haunt the sector, according to the Financial Ombudsman Service (FOS).
The regulator revealed of the 141,846 complaints made to the FOS, 77 per cent were related to banking and credit at 109,155.
This also marked a huge leap from the same period in 2023, where it received 62,139 banking and credit complaints.
The total number of grievances for the final six months of 2024 increased 49 per cent from 2023.
The FOS said disputes in banking fraud, credit affordability and motor finance commission were the main drivers for the rise in complaints.
Vanquis Bank dwarfed its peers at 17,614. The lender reported a £34.8m loss in 2024 after costs related to complaints took a chunk out of the company’s bottom line.
Vanquis said FOS fees increased to £24.8m from £16.7m – a 66 per cent jump.
Meanwhile, credit provider Newday ranked second at 8,345. Ford’s Motor Company’s UK-based lending firm FCE Bank came in third at 6,530.
FCE Bank became the latest company to be stung by motor finance provisions after reserved £61m for potential payouts last month.
Erin Sims, financial services senior analyst at RSM UK, said: “Motor finance complaints, particularly those related to undisclosed or unfair commission arrangements, continue to be a major issue.
“Following heightened regulatory focus and media attention, consumers have become more aware of potential misselling in this area.”
Sims added: “As we await the Supreme Court’s ruling on motor lender’s discretionary commission payments, we may see complaints continue to rise in the first half of this year.”
Fintech giant Revolut saw 3,397 new complaints, which comes after the firm announced its customer base had grown 38 per cent to 52.5m last year. Its peer Monzo was an inch behind at 3,396 new complaints.
Barclays topped FTSE 100 lenders
Of the FTSE 100 banking giants, Barclays was hit with 4,301 new cases. The firm has reserved £90m for motor finance claims.
Lloyds Banking Group, the owner of Lloyds, Halifax and Bank of Scotland, saw 3,028 new cases. The firm leads the pack on motor finance provisions with £1.2bn.
HSBC received 3,476 and Natwest 2,881.
The motor finance case headed to the Supreme Court at the beginning of April, where Close Brothers and South African-based FirstRand sought to overturn the Court of Appeal’s ruling that it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent.
The FCA has pledged to conduct a sector-wide redress scheme within six-weeks if the judgment is upheld.
Ahead of the hearing, Shore Capital analyst Gary Greenwood told Morning Wire the hearing would “do little to calm investor nerves.”
“Consequently, share prices of those companies with exposure to the issue are likely to remain volatile until we have greater certainty on the outcome.”
Should the saga steer towards downsides, analysts expect Lloyds’ total compensation, including interest and administrative costs, to reach £4.6bn. Total payouts across lenders is anticipated to be north of £30bn.