The Financial Ombudsman Service (FOS) has announced that it is currently handling approximately 20,000 active complaints concerning car finance commissions.

This update comes as the FOS strives to clarify its procedures for addressing grievances and sets clear expectations for financial businesses and professional representatives.

The figure marks a significant increase compared to previous years. In the fourth quarter of 2021, the FOS reported handling 1,592 complaints about motor finance commission. By the third quarter of 2023, this number had risen to 2,987 new complaints, making it the third most-complained-about product in their data at that time.

In a significant move earlier this year, the FOS published its inaugural set of representative final decisions in January 2024, which comprehensively addressed the arguments presented in a variety of motor finance complaints. The FOS emphasises its commitment to ensuring fair compensation for all valid complaints and aims to provide transparent, well-reasoned responses promptly.

Despite the FOS’s efforts, legal proceedings have introduced complexities into the resolution process. In March, three cases related to car finance commissions were authorised to proceed to the Court of Appeal, with the hearings yet to occur. The forthcoming Court of Appeal decision is anticipated to influence the legal framework surrounding secret and half-disclosed commissions in motor finance.

Moreover, Clydesdale Financial Services Limited, operating as Barclays Partner Finance, initiated judicial review proceedings against one of the FOS’s decisions in April. The hearings for this review are still pending. This case pertains to a customer, referred to as Miss L, who was not informed about a commission payment included in her loan agreement, which amounted to nearly £1,600.

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Acknowledging the potential implications of both the judicial review and the Court of Appeal’s rulings, the FOS said it recognised that these outcomes may necessitate adjustments to their approach to handling complaints with similar issues.

In a parallel development, the Financial Conduct Authority (FCA) declared a review of past motor finance discretionary commission arrangements in January. Subsequently, the FCA temporarily suspended the obligation for firms to deliver final responses in certain Discretionary Commission Arrangement (DCA) cases. The FCA has pledged to disclose further details regarding future actions by 24 September 2024.

Given the uncertainty surrounding the timing of the court decisions, the FOS anticipates a delay in issuing final decisions on the affected cases. Nonetheless, the FOS remains dedicated to processing and investigating complaints to the fullest extent possible during the interim period of the FCA review and court proceedings.

Deputy Chief Ombudsman, James Dipple-Johnstone, said: “When individuals finance a car purchase, fairness and transparency are paramount. It’s regrettable that the ongoing legal challenges have hindered our capacity to resolve certain cases conclusively. Nevertheless, we are resolute in advancing consumer complaints and expect firms to continue their diligent investigation and timely response to these matters.”

Barclays mounts legal challenge to FoS ruling over motor finance claim