Banking institutions, notably Vanquis and Barclays, witness a surge in customer complaints concerning motor finance services.

Banking institutions, notably Vanquis and Barclays, witness a surge in customer complaints concerning motor finance services.

Rewritten Article:

The second half of 2024 saw an astonishing 76% increase in banking complaints, a trend driven by controversies such as banking fraud, credit affordability disputes, and motor finance commission cases, according to the Financial Ombudsman Service (FOS). This incredibly sharp rise saw the FOS handle 141,846 complaints — a staggering 83% jump from the 110,235 complaints they received in the same period of 2023.

Those troubled water in the banking sector are far from calm. Among the complaints that flooded the FOS, a whopping 77% were banking and credit-related, totaling 109,155. To put this into perspective, for the same period in 2023, the FOS had only received 62,139 banking and credit complaints.

These numbers are grave indicators of a significant problem heading straight for the heart of the financial industry. But it's not just the sheer quantity of complaints that's alarming; it's the types of complaints causing the uproar, in particular, motor finance, banking fraud, and credit affordability cases.

In knee-deep water in this scandalous soup, Vanquis Bank took the lead with a mind-boggling 17,614 complaints. The lender reported a sizable £34.8m loss in 2024 following astronomical costs related to complaints eating into their bottom line. Vanquis revealed a staggering increase in FOS fees, soaring from £16.7m to £24.8m — a leap of 66%.

Newday, a noteworthy credit provider, came in second at 8,345 complaints, while Ford's Motor Company's UK-based lending firm FCE Bank wasn't far behind at 6,530. FCE Bank found itself stung by motor finance provisions after setting aside £61m for potential payouts last month.

In light of these developments, Erin Sims, a senior financial services analyst at RSM UK, gave a stark warning, explaining, "The complaints surrounding motor finance, particularly those related to undisclosed commission arrangements, continue to be a major issue." As we wait for the Supreme Court's ruling on motor lender's discretionary commission payments, Sims foresees more complaints flooding in during the first half of 2025.

Fintech players Revolut and Monzo wouldn't escape the tide either, with the former witnessing 3,397 new complaints — a rise given that it recently announced a 38% growth in its customer base to reach 52.5 million users. Monzo trailed just behind with 3,396 new complaints.

Ranking amongst the FTSE 100 banking giants, Barclays emerged as the hardest hit, with 4,301 new cases. The firm already has a £90m motor finance claims reserve in place. Lloyds Banking Group, the owner of Lloyds, Halifax, and Bank of Scotland, experienced 3,028 new cases. With a hefty £1.2bn motor finance provision, Lloyds leads the pack in this regard. HSBC and Natwest recorded 3,476 and 2,881 new complaints, respectively.

The motor finance case headed to the Supreme Court at the beginning of April. Here, Close Brothers and South African-based FirstRand are fighting to overturn the Court of Appeal's ruling that deemed it unlawful for banks to pay a commission to a car dealer without the customer's informed consent. If the ruling favors these parties, the FCA has promised to conduct a sector-wide redress scheme within six weeks.

Ahead of the hearing, Shore Capital analyst Gary Greenwood expressed concern, telling City AM that the proceedings would "do little to calm investor nerves." Greenwood emphasized that, until there's greater certainty on the ruling's outcome, "share prices of those companies with exposure to the issue are likely to remain volatile."

Should this saga take a downturn, experts forecast that Lloyds' total compensation, including interest and administrative costs, could reach a staggering £4.6bn. Estimated total payouts across lenders is expected to exceed £30bn. The sheer scale of these numbers underscores the gravity of the situation, and the financial industry must act swiftly and decisively to address these concerns and restore consumer trust.

1. The Financial Ombudsman Service (FOS) reported an 83% jump in complaints in the second half of 2024, with 77% of these complaints being banking and credit-related.
2. In 2024, Vanquis Bank faced 17,614 complaints, leading to a £34.8m loss and a 66% increase in FOS fees.
3. Newday and Ford's Motor Company's UK-based lending firm FCE Bank followed with 8,345 and 6,530 complaints, respectively.
4. The industry analyst, Erin Sims, warned that complaints surrounding motor finance, particularly those related to undisclosed commission arrangements, will continue to be a significant issue in 2025.
5. Among the FTSE 100 banking giants, Barclays faced 4,301 new cases, while Lloyds Banking Group, with a £1.2bn motor finance provision, led the pack in motor finance-related complaints.
6. As the motor finance case heads to the Supreme Court, experts anticipate that, should the ruling not favor the parties, total compensation for the industry could exceed £30bn, highlighting the severity of the situation.

Read also: