Car Finance Claims and Credit Card Issues Lead to Rise in UK Banking Complains

United Kingdom banks are seeing a sharp rise in complaints this year after a surge in car finance claims and credit card concerns, said the Financial Times. The uptick implies mounting consumer frustrations related to institutions’ lending practices and complaints addressing. The Financial Ombudsman Service (FOS) saw an almost 100% increase in disputes amidst calls for accountability.

Car finance claims, credit lines named as drivers of upsurge

Customers seeking car finance compensation and those concerned with debt management are at the helm of this significant surge in FOS reports. 

The FOS reported a total of 133,019 complaints during the first half of 2024, a significant jump from the 93,114 recorded during the same time period in 2023. 

A considerable segment of the total figure – 101,031 complaints – is attributed to the banking and credit sectors, particularly lending, credit cards, car finance, fraud, and scams. In the same period last year, banking- and credit-related concerns were only at 56,690, showing a nearly double surge. 

This comes in light of the recently concluded court review of unreasonably high fees in car dealerships and lenders by the Financial Conduct Authority (FCA). Added to this is the continuous rise of interest rates in motor financing.

The FCA has been looking into the motor financing sector amidst issues of mis-sold car finance, as well as concerns regarding excessive interest rates and fees.

Aside from motor finance, credit card-related reports significantly contribute to the substantial jump in complaints. Many aggrieved consumers point to perceived unfair practices including irresponsible lending.

Consumer frustrations on the rise, businesses urged to act – Industry experts

Interestingly, while banking and credit complaints are rising fast, other financial sectors are improving dispute rates. General insurance and pure protection reports declined from 224,496 in the first half of 2023 to 22,489 in the same period this year. 

The year-over-year complaints for mortgages and home finance segments also fell from 5,002 to 3,685, decumulation life and pension disputes dropped from 4,189 to 3,389, and investments declined from 2,593 to 2,305. 

The notable decrease in these particular sectors suggests that while well-performing segments have been implementing improvements in their respective practices, the car finance and credit card divisions are falling behind. 

The considerable jump seen by the two sectors indicates a shift in consumer tolerance in the financial sector’s handling of car finance claims and credit card debt, with many seeking professional representation to obtain compensation for perceived unfair terms or treatment. 

Simplify Consulting lead consultant Dom House believes this can be attributed to heightened awareness of consumer rights among the public. He said, “Consumers’ expectations have been raised as new technology becomes mainstream,” pertaining to the root cause of such complaints.

FOS chief executive and chief ombudsman Abby Thomas noted that motor lending institutions and banks “should put consumers at the heart of their service” and are “open and transparent with their consumers, treating them with fairness and understanding.”

House echoes this sentiment, suggesting that firms should make moves to “reverse” this drift by re-considering their policy changes and making sure they are in line with consumer duty in a bid to balance “prevention and cure.” He explained that “firms need to identify the root causes and address them to enhance customer experience and reduce complaints over time.”

Meanwhile, Thomas reminded consumers and their professional representatives that their cases must be “well-evidenced and have merit.”

Growing concerns re: FOS credibility

While consumers have been looking to the FOS for aid, Warwick University researchers have raised questions on the credibility of the complaints body. According to The Guardian, the study implies that the uphold rates in favor of complainants published by the FOS may not be indicative of consumer satisfaction levels. In particular, the reported uphold rate of 37% may actually be 24% in terms of satisfaction rate.

In response, the regulator refuted the assertions on grounds of insufficient sample size as the researchers evaluated “just 99 cases – less than 0.5% of [its] annual caseload,” and committed to the goal of "[providing] answers which are fair and reasonable."

Implications for the car finance sector

The mounting wave of motor financing reports is expected to bring billions in compensation costs related to mis-sold car finance and other similar malpractices, as per analysts. 

Lenders took action by reviewing their existing policies and practices, especially in light of the FCA’s pending release of guidelines related to motor finance in May 2025. This move is forecasted to bring closer attention to lending practices in the said sector, pushing it to improve transparency and prioritize consumer duty.