Complaints to the Financial Ombudsman Service (FOS) surged to more than 140,000 in the second half of 2024, with motor finance mis-selling among the key drivers behind the rise.
Millions of motorists could be in line for compensation after they were mis-sold motor finance, which overcharged them in some cases by thousands of pounds.
The FOS, which was set up to resolve disputes between financial firms and consumers, provides a free alternative to going to court. It received 141,846 complaints between July and December 2024 — a 49% increase compared to the same period in 2023.
Here, we take a closer look at the figures and explain how to complain if you think you’ve been mis-sold car finance.
Rise in motor finance complaints
In the final quarter of 2024, hire purchase for motor vehicles became the most complained-about product, with 15,956 complaints lodged with the FOS between October and December. This was almost triple the number made in the same period in 2023, when 5,419 complaints were submitted.
Complaints about motor finance commission drove the increase in both hire purchase (motor) and conditional sale (motor) complaints, according to the FOS.
With hire purchase you pay for the car in monthly instalments and only become the legal owner after making a final ‘option to purchase’ payment at the end of the agreement. If you miss payments, the car can be repossessed.
With a conditional sale there’s no separate final payment — ownership of the car passes to you automatically once all the instalments have been made.
Together, these products made up 85% of all consumer credit complaints between October and December.
Why car finance is under fire
Before 28 January 2021, some car finance lenders had ‘discretionary commission arrangements’ with car dealers.
Under these terms, dealers earned commission from the lender based on the interest rate charged to the customer. This may have incentivised them to charge higher interest rates to customers than was necessary, meaning many motorists could have overpaid for their finance deals.
The Financial Conduct Authority (FCA) banned this practice in January 2021, and in January 2024 it has been considering whether customers affected by these arrangements should be compensated.
A Court of Appeal decision in October 2024 widened the potential pool of consumers who may be entitled to compensation. The situation is currently on hold following an appeal to the Supreme Court, with a final ruling expected this summer.
- Find out more: Car finance mis-selling investigation
The most complained about firms
A total of 109,155 credit and banking complaints were lodged with the FOS between July and December last year, a 76% increase on the 62,139 complaints received during the same period in 2023.
Vanquis Bank was the most complained about institution with 17,614 new cases against it with the FOS.
Disputes about banking fraud, credit affordability as well as motor finance commission were the main drivers for the rise in complaints.
Source: Financial Ombudsman Service, July – December 2024
Who’s bringing complaints – and who’s more likely to succeed?
The FOS said nearly half (46%) of all complaints lodged between July and December were brought by professional representatives. This was up from 22% during the same period in 2023.
But consumers who complain directly have a better chance of success. The FOS upheld around 37% of complaints brought by individuals, compared with just 25% of those submitted by professional representatives.
In April, the Ombudsman introduced a new fee model to charge professional representatives who bring more than ten complaints a year. The move aims to ‘encourage these representatives to submit better-evidenced complaints, considering their merits more diligently before referring them.’
It remains free for individual consumers to submit a complaint.
How to complain if you’ve been mis-sold car finance
If you think you’ve been mis-sold car finance, your first step should be to gather evidence.
You may have been mis-sold finance if any of the following apply to you:
- You were given misleading advice by a car dealer
- You can’t afford the payments (which may mean proper affordability checks weren’t carried out)
- Your final payment is more than you expected
- A car dealer used hard-sell tactics and you felt under pressure to buy
Your next step should be to make a complaint to your finance company and car dealer. This will give them a chance to look at what happened, and they may remedy the situation themselves. Make sure to keep a record of all communications.
If the finance company rejects your complaint, you can report them to the Financial Ombudsman Service who will investigate the issue independently.
Be aware that the FOS may hold off on a decision until the final court ruling is announced, but they should progress your case as much as possible in the meantime.
- Find out more: How to complain if you’ve been mis-sold car finance
