FCA motor finance redress scheme leads to substantial decrease in FOS complaints

Decline in number of motor finance complaints

While the FOS credits several factors for the drop, it highlights a notable decline in the number of motor finance complaints received (just 400, compared to 14,400 during the third financial quarter of 2024).

This drop in the number of motor finance complaints follows:

• The Supreme Court's decision in Johnson v FirstRand Bank, Wrench v FirstRand Bank, and Hopcraft v Close Brothers, which significantly limited the scope for so-called "secret commission" claims based on fiduciary duty and bribery, but left the door open to claims centred on unfairness within the meaning of section 140A of the Consumer Credit Act 1974 (see here for further details); and
• The Financial Conduct Authority's ("FCA") proposal for a motor finance redress scheme (see our previous article here).

The FOS notes that the clarification from the Supreme Court has also helped resolve more than 7,000 motor finance complaints during the quarter. In these cases, the FOS has determined that there was no unfair relationship between the lender and the customer.

Other trends

The FOS has also seen a decrease in the number of irresponsible / unaffordable lending cases, with 4,800 received compared to 13,200 in the same quarter in 2024. One factor cited for this change is a shift by professional representatives towards submitting fewer but better evidenced complaints.

Next steps

The FCA is expected to publish its policy statement and the final rules for a motor finance redress scheme early this year.

In the meantime, the FCA and Solicitors Regulation Authority have published a joint message warning claims management companies and law firms involved in motor finance claims to make sure clients do not have multiple representatives for the same claim, and are not charged excessive termination fees (see our article here for further details).

If you would like to discuss the issues raised in this article in more detail, including issues relating to commission arrangements and / or "secret commissions" claims more generally, please get in touch with Terence Dickens or with Gena Ritchie.