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Complaints to the UK ombudsman about alleged mis-selling of car finance have more than doubled from a year earlier, increasing the urgency for regulators to seek a solution to the growing controversy.
The surge in complaints about car financing contributed to a more than 50 per cent jump in the overall number of new cases brought to the Financial Ombudsman Service, to 73,692, in the third quarter compared to the same period a year ago.
The FOS, which resolves consumer complaints against financial services companies, published data on Wednesday showing complaints about car financing reached 11,817 in the third quarter, up from 4,622 a year earlier.
While the number of new car financing cases being brought to the FOS dipped from 15,925 in the second quarter, helping total cases to also slightly decline, it is likely to fuel further calls for the UK to reform how it handles consumer concerns.
Turmoil in car financing deepened last month after the Court of Appeal ruled it was unlawful for car dealers to receive commission from motor finance providers, unless the payments had been properly disclosed to the customer and consent had been given.
Analysts estimate the car finance controversy could force banks to pay up to £30bn of redress. This has also disrupted the supply of loans to car buyers, left the FOS struggling to cope with the volume of cases and forced the FCA to pause the complaints process.
Earlier this month, chancellor Rachel Reeves called for an improvement in how the FOS and Financial Conduct Authority work together to avoid “historic market practice and mass redress events”.
Since then, the two institutions have presented plans for overhauling the way financial complaints are handled, such as giving companies longer to respond to customer complaints and reducing the scope to appeal against ombudsman decisions.
The FOS has also announced plans to start charging fees to claims managers and other professional representatives of consumers, which it said were behind a third of all complaints it handles and 85 per cent of credit card cases.
The FOS said complaints about financial fraud and scams reached a record high, adding to fears that cybercriminals are increasingly preying on the online financial activities of British consumers.
The ombudsman received 9,091 cases about fraud and scams in the last quarter, up 45 per cent from a year earlier. Many of the cases involved cryptocurrency scams, it said.
“It’s concerning to see yet another rise in fraud and scams cases coming to our service,” said Abby Thomas, FOS chief executive.
“People can feel embarrassed to have fallen victim to a fraud or scam and may be reluctant to report the issue, but these crimes can be complex and incredibly convincing and nobody should be afraid to come forward,” she added.
The ombudsman said there had been a notable rise of multi-stage frauds, where funds pass through several banks before reaching the fraudster.
“This is particularly prevalent in cryptocurrency investment scams as well as ‘safe account’ scams, where people are cold called by fraudsters posing as a trusted entity, such as their bank, and persuaded to transfer money to another account,” it said.
