Sharp drop in FOS auto finance complaints

Motor finance complaints brought to the Financial Ombudsman Service (FOS) fell by over a third in the first quarter of the year, while complaints about perceived irresponsible and unaffordable lending have halved, latest figures show.

FOS reported that financial complaints needing its intervention have fallen to their lowest level in over a year, citing early signs of the impact of increased charges for those brought by professional representatives.

The Ombudsman processed 68,000 complaints in the first three months of this financial year, down from 74,600 news cases at the same time last year, April to June 2024.

FOS said the most complained about issue – motor finance commission – has dropped from 36,000 cases in the last three months of 2024/25 to 21,500 cases processed in the first quarter of this financial year. There were 10,000 new cases relating to perceived irresponsible and unaffordable lending, compared to 21,600 at the same time in 2024/25.

From 1 April, FOS has been charging professional representatives £250 to refer a case under a new charging regime, which allows claims management companies (CMCs) and other third parties to refer ten cases for free.

After that, every subsequent case is chargeable. They will receive £175 back in credit if the complaint is found in favour of the consumer they represent, reducing the charge they pay to £75. 

If a complaint referred by a professional representative is not upheld or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650. 

CMCs

CMCs have been particularly active in the motor finance market, running significant advertising campaigns in the wake of last October’s Court of Appeal decision relating to three auto finance cases.

August’s Supreme Court judgment, which overturned key element of the Court of Appeal decision in the two cases relating to Hopcraft and Wrench, did find against lenders in the third case, involving Johnston. However, the legal ruling focused on requirements under the Consumer Credit Act, rather than the broader issues of bribery and fiduciary duty which were under consideration in the other two challenges.

In its analysis, FOS said that while 30,800 cases were brought by professional representatives in the first quarter of this year, compared to 36,600 in the first quarter last year, it is likely that the next set of quarterly data will show even fewer complaints brought through this route.

“The particularly high demand is one of the reasons we have been working closely with HM Treasury (HMT) and the Financial Conduct Authority (FCA) to modernise the dispute resolution system to ensure consumers can continue to access a quick and high-quality alternative to the courts. 

“The proposals include changes to the way we process complaints to ensure they are well-evidenced before an investigation begins, as well as guidelines to help industry assess and trigger the need to resolve a situation with wider implications that could spike complaints. Both consultations close on the 8 October.”