FOS predicts rise in car finance claims

The Financial Ombudsman Service (FOS) is gearing up for a hike in the level of new cases it handles this year, following a sharp rise in auto finance complaints which are not affected by the Financial Conduct Authority’s (FCA) review of historical practices.

The regulator’s original estimate of 181,300 new cases in total in 2024/25 has been revised up to 210,000. Banking and credit complaints form the majority (149,200) and of these 13,900 will be about motor finance commission that fall outside the FCA’s review.

FOS is also expecting 47,400 insurance complaints, of which 18,700 will be about motor insurance, along with 12,800 investment and pensions complaints.

Abby Thomas (pictured), FOS chief executive and chief ombudsman, said: “In the year ahead it’s likely that our service will see increasing levels of complaints, with many of those disputes expected to focus on the critical issues that impact people’s everyday lives. This includes perceived unaffordable lending, concerns about car loan agreements, and disputes around fraud and scams.”

FOS has committed to resolve 17% more cases in the year ahead than in 2023/24, up from 192,500 to 225,000, and has set a new target of resolving 90% of cases within six months. The regulator reported by it had cut the time it takes to resolve a case from 4.8 months in 2022/23 to 2.96 months by the last three months of 2023/24.

Cost reduction

The cost of FOS services to industry are to be trimmed in 2024/25. The case fee will drop by £100 per case to £650, while the compulsory and voluntary jurisdiction levy costs to businesses will also be reduced. The regulator’s estimates suggest it will result in an effective £60m reduction in case fee and levy costs to businesses, once inflation and increases in the number of cases are taken into account.

FOS is also looking closely at the option for charging charge claims management companies who bring cases to the regulator, as well as other relevant professional representatives, making use of new powers granted in the Financial Services and Markets Act.

Martin Lewis, founder of MoneySavingExpert.com has published a car finance reclaim tool, which prompted over 1,080,000 car finance complaint letters in the first month since launch in February. The website reports the three most complained about lenders so far are Black Horse, Volkswagen Financial Services and Stellantis Financial Services.

Simon Evans, who heads up the Consumer Redress Association, which represents claims management companies, has pointed out that many consumers will have bought more than one vehicle during the period under FCA investigation.

“What we are seeing through our member firms who are engaging with consumers at the moment is that actually each person has an average of about 2.3 claims. So they have had two or three cars in that period and all of those qualify for a claim,” Evans said.”

“It is clear that a strong momentum is building around car finance claims, regardless of the merit of many of the submissions, in part because there is currently no risk to the individual in making a complaint. However, there is significant risk to lenders’ businesses and the price customers will pay in future,” noted Edward Peck, CEO of Asset Finance Connect.