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Complaints to the UK ombudsman regarding alleged mis-selling of car finance have more than doubled compared to last year, highlighting the need for regulators to address this growing issue.
The increase in complaints related to car financing contributed to a 50% rise in the total number of new cases brought to the Financial Ombudsman Service, reaching 73,692 in the third quarter, up from the same period last year.
The FOS, which handles consumer complaints against financial services firms, released data showing that complaints about car financing rose to 11,817 in the third quarter, up from 4,622 a year ago.
While the number of new car financing cases at the FOS decreased from the second quarter, leading to a slight overall decline in total cases, there is a growing demand for the UK to reform its approach to addressing consumer grievances.
The turmoil in car financing escalated after a Court of Appeal ruling deemed it unlawful for car dealers to receive commission from motor finance providers without proper disclosure and customer consent.
Analysts project that the car finance controversy could result in banks paying up to £30 billion in redress. This has disrupted the loan supply to car buyers, overwhelmed the FOS with case volume, and prompted the FCA to halt the complaints process.
Chancellor Rachel Reeves recently called for improved collaboration between the FOS and FCA to prevent market practices and mass redress events. Subsequently, both institutions presented plans to revamp how financial complaints are handled.
The FOS plans to introduce fees for claims managers and other professional consumer representatives, who are involved in a significant portion of the complaints it receives.
Moreover, the FOS highlighted a record number of cases related to financial fraud and scams, including an increase in cryptocurrency scams targeting British consumers.
Abby Thomas, FOS chief executive, expressed concern over the rise in fraud and scam cases and emphasized the importance of reporting such incidents to combat these complex crimes.
The ombudsman noted an increase in multi-stage frauds, particularly in cryptocurrency investment and ‘safe account’ scams, where fraudsters deceive individuals into transferring money to fraudulent accounts.