James Dipple-Johnstone, interim chief ombudsman at the Financial Ombudsman Service (FOS), appeared before the Treasury Committee today to discuss the scale of these complaints and how they compare to the PPI scandal.
A major update has been issued for 60,000 drivers over the car finance scandal. James Dipple-Johnstone, interim chief ombudsman at the Financial Ombudsman Service (FOS), appeared before the Treasury Committee today to discuss the scale of these complaints and how they compare to the PPI scandal.
He told MPs: “We’ve got over 60,000 cases with us relating to motor finance commission. So it is quite a significant block of work, which is why we’ve put a team onto it, not just to leave it there until the courts decide what they’re going to decide, but to start to prepare it so we can move it through quickly.
“Because we’ll have to be dealing with that next year and the year after.” The Supreme Court granted permission to appeal the Court of Appeal’s decision in a case examining the permissibility of motor finance commission payments, which challenged traditional legal thinking relating to customary commission arrangements across all retail sectors, and which may, if upheld, cause regulators to take a more aggressive approach to historical commission payments in the motor finance industry.
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On 25 October 2024 the Court of Appeal handed down its decision in three cases concerning the payment of commission to car dealers acting as brokers arranging financing for their customers. Mr Dipple-Johnstone said: “Obviously the service saw a lot more during PPI but there was a wider selling of that kind of product.” He said colleagues had said of the PPI scandal: “It was a slow burn, then it increased quite dramatically, and then the service cleared the work through.
“So what we’ve tried to do is learn from that event, prepare our ground, make sure we’ve got the training in place, we can scale up our resources quickly, we understand the product, we’ve got the legal advice, we’ve got the digital platforms to deal with the cases, so that if they do come through to us, we’re able to scale up quickly, so we can provide the best service we can to customers.”
The FCA banned discretionary commission arrangements in January 2021 in order to remove the incentive for brokers to increase the interest rate that a customer pays for their motor finance. Since then, motor finance firms have been inundated with complaints claiming compensation for commission arrangements paid prior to the ban.
According to the FCA, motor finance firms have rejected most of these claims on the basis that they have not acted unfairly nor caused their customers loss pursuant to the applicable legal and regulatory requirements at the relevant time.
However, the Financial Ombudsman Service has recently upheld two of these complaints. In another recent development, on 17 December 2024 the High Court dismissed a legal challenge to the FOS’s decision to uphold one of these complaints.
