Motor finance drags FOS complaints to highest since PPI scandal
The motor finance row has dragged complaints to the Financial Ombudsman Service (FOS) to the highest level since the PPI scandal.
Consumers lodged 305,726 complaints with the FOS in the year ending March 31 2025, which edged towards highs of 388,392 in year ending March 2019.
Complaints regarding motor finance led the spike at 73,328. This was a staggering near-500 per cent jump from 12,604 the previous period.
The Supreme Court is expected to give its verdict on whether it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent in the summer.
The City watchdog has said it will confirm within six weeks of the Supreme Court judgment whether it is proposing to introduce a redress scheme.
Grievances related to irresponsible and unaffordable lending ranked second at 71,685 – a significant increase from 33,221 the prior year.
The ombudsman’s caseload increased by over 50 per cent over the course of the year.
The FOS said around half of the complaints were brought forward by professional representatives, compared to a quarter previously. The regulator said the increase had mainly being focused on credit affordability and car finance complaints.
Despite this, only 34 per cent of the complaints were upheld in the consumer’s favour, which was down from 37 per cent in the last year, despite the jump in complaints.
FOS fighting ‘quasi-regulator’ scrutiny
The fresh data follows a crackdown on the FOS after it had been branded a “quasi regulator”.
The regulator has begun to charge professional representatives £250 for each case referred to the FOS beyond the first ten cases per financial year.
Should a complaint be upheld in favour of the consumer, the fee is reduced to £75.
Under the new system, which came into effect April 2025, banks will not be charged for the first three complaints they receive in the financial year. From the fourth complaint forward, a case fee of £650 is applied. If a complaint is dismissed, withdrawn, or abandoned, or if it is found to be outside the FOS’s jurisdiction, the fee is reduced to £475.
But the government has eyed reforming the FOS as another landmark step in their deregulation mission to drive economic growth.
City minister Emma Reynolds said: “[The FOS] should not act as a quasi regulator. Changes are needed to provide greater stability and clearer expectations on redress of all parties.”
The Treasury clipping the watchdog’s wings would follow the abolition of the Payment Systems Regulator (PSR) in March 2025 – the first major move by Labour amid its degregulation push.
James Dipple-Johnstone, interim chief ombudsman at the Financial Ombudsman Service, said: “Although we resolved thousands of cases last year, we know there’s more to do which is why we are driving forward ambitious plans to transform our service.”
The FOS’ chief said the regulator would work closely with the Treasury and Financial Conduct Authority to “ensure the system – including the vital role our service plays within it – is fit for the future.”