Car finance complaints skyrocket as 'unlawful' fraud and scam cases spiral - 'Concerning to see'

The complaints were in response to discretionary commission agreements (DCA) applied to car finance prices which were not made public to the customers.

The practice, which has been banned since 2021, saw thousands of drivers overcharged on car payments made before January 28 of the same year.

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Abby Thomas, Chief Executive and Chief Ombudsman of the Financial Ombudsman Service, said: “It’s concerning to see yet another rise in fraud and scam cases coming to our service.

“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.

“In recent years, as a result of our investigations into thousands of cases, more than £150million has been returned to those who have fallen victim to a scam."

The rise in the number of complaints comes after a Court of Appeal ruled in favour of customers and stated that it was “unlawful” for car finance firms to have obscured the commission agreements.

This decision applies to both fixed commission and discretionary commission arrangements in motor finance agreements.

After the court ruling, the Financial Conduct Authority warned that car finance firms would be more likely to receive a high volume of complaints in response to the judgment which is reflected in the recent report.

To help combat this, the UK regulator said it would consult on allowing firms more time to handle complaints with a proposed time frame of December 2025.

Nikhil Rathi, chief executive of the FCA explained: “The Court of Appeal’s ruling means many customers who bought a car using finance through a dealer could be owed compensation.

“We want to make sure that consumers who are owed money get it in an orderly way, and that the motor finance market continues to provide competitive deals for the millions of people that rely on it.”

Martin Lewis, founder of Money Saving Expert, has previously warned that the car finance issue could reach a "PPI scale of payouts" with the floodgates open now for more people than before given a chance to complain.

The FCA noted that if the extended time frame goes ahead, firms will need to use the additional time to ensure they have the “resources to investigate and issue final responses to complaints at the end of the proposed extension”.

The Ombudsman report also identified a drop in car or motorcycle insurance complaints, which decreased moderately to 3,386 compared to 4,036 last year.

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Pat Hurley, Ombudsman Director at the Financial Ombudsman Service explained that scammers are "always evolving and they’re constantly looking for new ways to defraud people".

“Increasingly, we’re seeing more multi-stage frauds, where fraudsters encourage people to move money through different banks or other payment providers for ‘investment’ opportunities including cryptocurrency. Whilst the victim is promised amazing returns, in reality it's actually a scam," she noted.