Motor Finance Redress: One Rule for One at FOS?

In our article yesterday we asked whether the FCA’s motor finance redress consultation is just a box-ticking exercise. Today, we’re taking the next step.

We have now commenced escalating complaints at the Financial Ombudsman Service (FOS) that do meet the FCA’s proposed “high commission” criteria, using the very same thresholds FOS has already used to reject complaints that don’t meet them.

Those thresholds, as set out in the FCA’s consultation CP25/27, are where commission is:

• ≥ 35% of the total cost of credit, and
• ≥ 10% of the loan amount.

Remember that these numbers are still only proposals, not final rules – we believe the thresholds are set far too high.

However, FOS has already been lifting them straight from the consultation and using them as a decisive reason to reject complaints where the commission falls below those levels.

So our position is simple:

If FOS is prepared to rely on those draft thresholds to reject complaints that fall below them, it must be equally prepared to uphold complaints that fall above them.

You can’t have it both ways.

From observing inconsistency to challenging it

In yesterday’s article we set out how FOS has, in practice, been:

• Treating the proposed 35% / 10% “tipping point” as a hard cut-off, and
• Saying, in effect, “Your commission wasn’t high enough under the proposed FCA scheme, so we’re not persuaded it was unfair.”

That is not a neutral, “wait and see” approach to a live consultation. That is pre-judging complaints using thresholds that the FCA itself is still consulting on and may yet change (so it would have us believe).

We’ve now moved from watching that inconsistency to actively challenging it in FOS cases that do qualify under the same rules FOS has been leaning on to reject others.

In these escalated complaints, we are arguing that:

• Where commission meets or exceeds the 35% / 10% proposed tipping point, that is unarguable evidence of a high-commission, unfair relationship.
• FOS cannot use these thresholds “one way only”. If they are good enough to reject “below threshold” complaints, they must be good enough to support “above threshold” upholds.
• Consistency isn’t optional. Consumers are entitled to expect the same yardstick to be applied both when it helps them and when it doesn’t.

In FOS’ response to our challenge it has asked for time to respond in detail to the points raised, requesting that we temporarily refrain from raising more complaints that do qualify.

“Not part of the scheme”… but happy to use the scheme rules?

FOS has been clear in its messaging that complaints already with FOS are not part of the FCA’s proposed s.404 redress scheme. That’s the line when it wants to say, “We’re not bound by the Redress Scheme, these are separate processes.”

At the same time, though, we’ve seen FOS:

• Directly lift and reference the draft 35% / 10% scheme thresholds, and
• Make them the central and key reason to reject complaints, long before any scheme has actually been made.

So which is it?

• If FOS cases are not part of the scheme, why are draft scheme rules being used at all to knock complaints out?
• If the FCA’s thresholds are only a proposal, why are they being treated as a binding hurdle for consumers – but only when that helps to reject the complaint?

Our escalated cases put that contradiction front and centre.

If FOS cases aren’t “paused”, why do so many look paused?

There’s another inconsistency we’re challenging.

FCA rules have introduced an imposed pause on certain motor finance commission complaints while the consultation plays out.

Yet FOS has, in it’s direct communications to us, indicated that the complaints it already holds are not subject to the Redress Scheme (which is why complaints are paused).

Fair enough – but then:

If FOS complaints aren’t under a FCA-imposed pause pending the potential Redress Scheme, why are so many FOS complaints effectively on ice – apart from the cases it has decided to reject based on the draft scheme criteria?

That looks very much like:

• Fast to reject, where a complaint falls below the draft thresholds; but
• Slow (or simply unwilling) to decide, where a complaint falls above them and deserves an uphold.

In other words, the draft scheme seems to be used as a filter only when it’s helpful to lenders, not consumers.

Many could argue that this approach is yet another indication of lender protection, given the impending highly controversial reduction in statutory compensation which is estimated will save lenders over £4 billion in compensation payments.

One rule for lenders, another for consumers. Is anybody surprised?

What we’re asking FOS to do immediately

In every FOS complaint we’re escalating that meets or exceeds the 35% / 10% proposed criteria, we’re asking for a clear, principled and consistent approach. Specifically, we’re arguing that FOS should:

• Acknowledge its own reliance on the draft thresholds in previous rejection decisions.
• Apply the same reasoning in reverse: where commission goes beyond those draft tipping points, that should count strongly towards finding that the relationship was unfair and upholding the complaint.
• Explain why, if complaints are not subject to the FCA pause, they are not progressing, particularly for consumers whose cases clearly meet the criteria FOS has itself been road-testing.
• Stop cherry-picking the draft scheme: either the thresholds are too uncertain to use at all (in which case they should not be used to reject), or they are solid enough to inform decisions both ways.

We are not asking for special treatment. We are asking for basic fairness, transparency and consistency.

Why this matters for consumers with hidden-commission motor finance

All of this might sound technical, but the real-world impact is straightforward:

• If your commission rate was below the FCA’s draft 35% / 10% tipping point, FOS may already have told you that it won’t uphold your complaint, effectively treating those numbers as if they were final.
• If your commission rate is above those thresholds, you may now be stuck in limbo with your complaint apparently paused or delayed, even while FOS insists it isn’t formally part of the FCA pause.

Either way, consumers lose:

• Those “below threshold” may have their cases rejected based on rules that don’t formally exist yet.
• Those “above threshold” might be waiting indefinitely for decisions that ought, logically, to be more favourable if FOS is being consistent.

That is the opposite of what an Ombudsman process is supposed to achieve.

One rule for one?

The FCA says its motor finance redress scheme is still under consultation. FOS says its complaints aren’t part of that scheme (and presumably not subject to the pause). Yet, on the ground, we see:

• draft scheme thresholds used as a weapon to reject complaints, and
• Delays and inertia where those same thresholds would favour consumers.

That’s why we’re no longer just questioning the process – we’re challenging it head-on in live FOS cases that do qualify under the very rules FOS has been happy to borrow.

If FOS insists on using the FCA’s draft scheme as a reference point, then our message is clear:

You can’t use the 35% / 10% criteria only when it helps lenders.
If you’re going to rely on them to reject, you must also rely on them to uphold.

Anything less really is just one rule for one.