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Shoppers have lodged a file variety of complaints about automobile loans with the UK monetary ombudsman, elevating the stress on regulators forward of an important courtroom case subsequent month.
The Monetary Ombudsman Service stated on Tuesday it had obtained 18,658 new circumstances about automobile loans within the three months to December, overtaking bank cards because the product topic to essentially the most unresolved complaints within the British financial sector.
The speedy progress highlights how automobile loans are swiftly turning into the largest UK shopper finance scandal since banks paid £50bn of redress over fee safety insurance coverage.
The controversy has added to a sense of turmoil on the FOS after its chief government unexpectedly give up final month, days earlier than the chair of the traditionally low-key physique referred to as for a “radical” shake-up of its guidelines and introduced plans to depart.
Metropolis of London executives have criticised the ombudsman — an impartial physique topic to guidelines written by the Monetary Conduct Authority — for being too fast to award compensation to clients, which bosses say deters overseas traders from the sector.
The federal government has responded by calling for a review of the redress system.
Figures for the ultimate quarter of 2024 present automobile finance circumstances filed on the ombudsman rose by a 3rd from the earlier quarter and greater than tripled from a yr earlier to succeed in their highest on file.
The info consists of each rent buy and conditional sale automobile financing agreements.
Instances about automobile finance have continued to pile up on the ombudsman regardless of the FCA pausing the complaints course of on this space whereas regulators await the end result of essential courtroom circumstances.
The Supreme Court docket is subsequent month as a consequence of hear an appeal by automobile mortgage suppliers difficult a ruling final yr from the Court docket of Enchantment, which shocked banks by siding with customers of their complaints about “secret” commissions on automobile loans.
The judgment that it was illegal for banks to pay a fee to a automobile supplier with out the shopper’s knowledgeable consent prompted HSBC analysts to estimate that the entire value of compensation for banks might attain £44bn.
This was adopted by a Excessive Court docket determination in December that dismissed a problem by Barclays towards an FOS ruling that it had unfairly added a £1,300 fee to the price of a automobile mortgage in 2018. Barclays is appealing towards that call.
Till these circumstances are totally resolved and the FCA ends its pause on the complaints course of, the ombudsman is unable to difficulty selections on automobile mortgage claims.
“We’re persevering with to see excessive volumes of motor finance fee circumstances and would encourage companies to contemplate whether or not complaints are coated by the FCA’s momentary grievance dealing with guidelines,” stated James Dipple-Johnstone, interim chief ombudsman.
To keep away from a logjam of circumstances, the ombudsman is conducting preliminary investigations into automobile finance circumstances, which Dipple-Johnstone stated would “guarantee we will resolve them as shortly as attainable when we’ve got the readability we’d like”.
Regardless of greater automobile mortgage circumstances, the general variety of complaints lodged on the ombudsman dipped to 68,430 within the closing quarter of 2024, down 7 per cent from the earlier quarter.
Virtually 80 per cent of automobile mortgage circumstances within the three months to December had been filed by skilled representatives, reminiscent of claims administration firms, which carry circumstances on behalf of customers in alternate for a minimize of any compensation awarded.
The ombudsman, which has determined to start out charging claims management companies to carry circumstances from subsequent month, stated such organisations accounted for 47 per cent of all its complaints between April and December final yr, up from 21 per cent in the identical interval a yr earlier.
The FOS stated 36 per cent of circumstances introduced instantly by customers had been upheld, whereas it upheld solely 26 per cent of complaints introduced by skilled representatives.
