Complaints to the Financial Ombudsman Service (FoS) about motor finance more than doubled in the three months to September.

The increase was primarily driven by professional representatives, sometimes known as claims management companies. However, the upheld cases emanating from such organisations were particularly low. 

Across all areas of complaints, FoS has reported that more than half of all complaints raised by professional representatives are not upheld. When it comes to motor finance cases, this falls to an uphold rate of just 8 per cent, compared to a 42 per cent uphold rate when cases in the same category were brought directly by consumers.

Commenting on the position regarding motor finance, James Dipple-Johnstone, Deputy Chief Ombudsman at the Financial Ombudsman, said:  “The vast majority of motor finance complaints are now brought by professional representatives. We’re seeing a mix of both good and bad practice, but with an uphold rate of just eight per cent, it’s clear some representatives could do more to learn from our established approach about which cases are likely to have merit and advise their clients accordingly.”

The Ombudsman has reacted to the trend of rising complaint submissions from professional service companies, and their low uphold rates have been identified by launching a consultation on new powers to charge relevant professional representatives for submitting claims. At the same, the Ombudsman announced that the fee levied on lenders for submitted cases is to be reduced by £100 per case.

Reflecting on the proposal, Tandem Motor Finance MD Dave Briggs observes: “The Ombudsman’s data-driven proposal is very welcome. I believe all lenders want to resolve customer complaints amicably. Where this proves difficult, FoS provides an accessible and free resolution option that we are obliged to ensure customers know about.

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There may be a role for professional representatives, some of whom benefit commercially at scale, to resolve financial disputes. However, whether the growing scale of activity relative to its current success levels, particularly in motor finance, is delivering good outcomes for customers is a reasonable question.

Implementing a charging regime for professional service companies at a level that encourages more targeted activity has a great deal of merit, particularly for consumers, to provide them with a realistic indication that their case might be upheld successfully. Such a move could also see fewer cases submitted, enabling the Ombudsman to accelerate response times on the worthy instances.”