Car Finance Commission Cases Increase

In a recent communication with its clients, the Financial Ombudsman Service (FOS) unveiled the intricacies surrounding ongoing legal battles affecting motor trade car finance commission cases – significantly influencing the resolution timeline for over 20,000 pending complaints.

As an impartial entity responsible for mediating disputes between financial institutions and consumers, the FOS disclosed the challenges it faces in resolving complaints related to the car finance commission. These issues are often due to the complexities introduced by ongoing judicial reviews and court proceedings.

Since January 2024, the FOS has been diligently addressing consumer complaints, striving to ensure fair compensation and transparent explanations while leveraging insights to refine complaint-handling processes for financial firms. However, the progress has been impeded by legal uncertainties stemming from pending court cases.

Three court cases granted permission to proceed to the Court of Appeal in March are yet to undergo hearings, with expectations that their outcomes will clarify the law’s application of commission payments in motor trade finance. Additionally, Clydesdale Financial Services Limited’s initiation of judicial review proceedings in April has further complicated the landscape surrounding these cases.

James Dipple-Johnstone, Deputy Chief Ombudsman, expressed disappointment over the impact of ongoing legal proceedings on the FOS’s ability to issue timely decisions. Nonetheless, he reiterated the FOS’s unwavering commitment to investigate complaints diligently and urged financial firms to address consumer concerns promptly.

Amidst these legal uncertainties, the Financial Conduct Authority (FCA) announced a review of historical motor finance discretionary commission arrangements in January, leading to a temporary halt in final response issuance for some cases. The FCA has pledged to provide additional guidance on the next steps by September 24, 2024.

While awaiting the outcomes of both the FCA review and court proceedings, the FOS continues to accept and investigate complaints, gathering essential information for future resolutions. The FOS has also published guidance for consumers and financial businesses, outlining its current approach and expectations in handling car finance commission complaints.

Despite the challenges posed by legal intricacies, the FOS remains steadfast in its mission to ensure fairness and transparency in resolving consumer disputes. It provides stakeholders with regular updates on the evolving landscape surrounding car finance commission cases.

With an ongoing influx of complaints, the Financial Ombudsman Service braces for increased cases. This highlights the need for efficiency and transparency in dispute-resolution processes. The evolving regulatory landscape underscores the importance of vigilance and adaptability for both consumers and financial institutions.

Different types of finance options often available to consumers of new and used vehicles include:

Personal Contract Purchase (PCP) involves an initial deposit followed by monthly instalments. A significant portion of the loan is deferred until the end of the agreement, allowing you to choose between owning the car by paying the final sum, returning it, or starting a new agreement.Hire Purchase (HP) requires an upfront deposit and equal monthly payments, including interest, with an ‘option to purchase’ fee, granting ownership of the car at the agreement’s conclusion.Personal Contract Hire (PCH) is akin to leasing, involving a deposit and monthly payments, but without ownership of the car at any point.Conditional Sale (CS) spreads the vehicle’s cost over one or more years. Ownership automatically transfers to the buyer once the finance is fully repaid, without any additional purchase fees.