Financial Ombudsman Service director highlights rise in motor finance commission complaints

The Financial Ombudsman Service is seeing the number of complaints it receives on motor finance rise over the past year.

Earlier this year it reported that complaints have been rising since Q4 2021 and in Q3 it is now the third most-complained about product in its data with 2,987 new complaints.

“Of the cases it resolved in Q3, it upheld 41% in consumers’ favour. The majority of complaints about the product in Q3 were about charges, fees and commission.

Viv Kelly, Ombudsman Director, who leads the consumer credit casework team set out her views in a FOS blog. 

“We see a range of complaints about car finance agreements – from admin issues to affordability. Increasingly, we’re hearing from customers about the fairness of commission arrangements when they took out a car finance agreement.”

So what are dealers doing wrong.

“We’re hearing from customers that the credit brokers or intermediaries who arranged the finance (usually a car dealership) didn’t tell them about the commission they would earn for arranging the finance.

“We’ve heard from customers who say they think the commission model used by the lender was unfair, that the advice the credit broker gave them wasn’t impartial, or that the credit broker didn’t secure the best interest rate available.”

Kelly said most of the complaints were coming from professional claims companies and he had been asked a number of time where this was another PPI in the waiting.

“We have been asked by some stakeholders whether we think this is “the next PPI” in terms of scale and numbers of complaints we uphold. Crucially, the size of the potential pool of complaints on this topic is significantly smaller than that for PPI,” she said.

The FOS has issued its first reaction to some cases brough to its door. Some went nowhere, others were upheld.

“A number of these have been non-uphold views. These are cases where it was clear that there was no issue with the commission model, because, for example, the broker only received a small amount of commission under a fixed payment arrangement, or even no commission at all.

“We’ve also issued a number of uphold views, where there was a Difference in Charges (DiC) model in place and we believe this had led to consumer detriment,” she said.