Financial ombudsman concerned about the rise in vehicle-related complaints

Complaints from people worried about whether they can pay their finance deals has reached a five-year high as vehicle problems now account for a quarter of all financial complaints

The Financial Ombudsman Service (FOS) has said complaints have been increasing in two separate sectors – motor financing and insurance.

On the motor financing side, the ombudsman received 4,622 motor-related complaints about hire purchase and 1,569 about conditional sale agreements from July to September 2023.

This latest data from the ombudsman shows that many car finance agreement claims are being submitted by ‘professional representatives’ – claims management companies and law firms. 

Claims management companies (CMCs) and law firms pursuing individual claims will charge you a fee. 

The ombudsman confirmed that they account for more than 90% of cases related to unaffordable and irresponsible lending and 70% of complaints about fees, charges and commission.

Yet, the uphold rate for these motor finance complaints brought by professional representatives was 8%, compared with a 42% uphold rate when cases in the same category were brought directly by consumers, the ombudsman said.

James Dipple-Johnstone, deputy chief ombudsman said:

‘The vast majority of motor finance complaints are now brought by professional representatives.

‘While professional representatives can play an important role in resolving financial disputes, we’re seeing too many speculative and poorly evidenced complaints.’

Consumer Voice reported last month on how drivers mis-sold car finance could be losing out on compensation last month. 

New powers to charge CMCs

Last week, the ombudsman launched a consultation on new powers to charge claims management companies and other relevant professional representatives.

‘We’re seeing a mix of both good and bad practice, but with an uphold rate of just 8%, it’s clear some representatives could do more to learn from our established approach about which cases are likely to have merit and advise their clients accordingly,’ said Dipple-Johnstone.

‘It’s important to remind consumers also that they do not need to use a professional representative as our service is free, independent and easy to use,’ he added.

Your options for claiming car finance commission compensation

If you arranged a car finance agreement before 2021 and suspect the interest agreed was too high then you have a number of options.

You could use a CMC to help you claim but there are free and simple ways to claim car commission compensation yourself – and doing this means you will keep all the money you’re awarded. 

You might be eligible to join the £1 billion collective action lawsuit that represents around one million UK consumers who he said had unwittingly overpaid for car finance over a six year period. 

Consumer advocate Doug Taylor has filed legal claims accusing Lloyds Banking Group, MotoNovo and Santander of anti-competitively inflating interest rates for finance agreements on used cars. 

Use our tool to help you work out which option is best for you.

Motor insurance complaints also hit five-year high

There were 4,036 complaints about car and motorcycle insurance from July to September 2023. These are the highest complaint levels that the ombudsman said it has received for each of these products in more than five years.

While car finance agreements and car and motorcycle insurance made up the vast majority of claims, other vehicle-related complaints included those about insurance for roadside assistance, caravans and commercial vehicles, as well as motor warranties, the ombudsman said.

In total, disputes arising from both the financing and insuring of people’s cars, motorcycles and caravans reached 11,869 complaints. In the same period the year before there were 6,744 complaints to the ombudsman about issues related to motor vehicles.

Problems with vehicle valuations, settlement delays and customer service 

When issues occur with people’s cars or motorcycles, and they need to claim on their insurance, complaints may arise over issues including disputes about vehicle valuations, customer service issues, and delays in claim settlements, it added.

Abby Thomas, chief executive and chief ombudsman of the FOS, said: ‘Many people depend on their cars so it’s concerning to see such a significant rise in vehicle-related complaints.

‘What is clear is that whatever the perceived issue, firms need to ensure they are treating customers with transparency and fairness.’

A spokesperson for the Association of British Insurers (ABI) said: ‘While challenges beyond insurers’ control, such as delays to car repairs, caused by some spare part shortages, can impact on timings, insurers work hard to process claims as quickly and efficiently as possible.

‘Our members always strive to provide the best possible customer service and understand the importance of clear and timely communication to support the customer throughout any claim.

‘We’re working with our members and the FOS to understand where improvements can be made, in particular any learnings from the complaints that have been upheld.’