Committee publication · Correspondence · 14 July 2026
Correspondence from Financial Ombudsman Service on motor finance compensation, dated 6 July 2026
From: Treasury Committee
Summary
The Financial Ombudsman Service (FOS) responds to Treasury Committee questions on motor finance compensation scenarios. FOS expects around 7,000 scheme-related cases in 2026/27 if the FCA scheme proceeds, absorbable within existing resources. However, it holds 84,297 open motor finance complaints (as of 26 June 2026). Without an FCA scheme, FOS could receive up to 1.14 million complaints, requiring 1,300–1,600 additional staff and approximately £600m in costs over four to five years.
Key findings
- FOS estimates 7,000 scheme-related cases in 2026/27 under the FCA scheme, but high-volume scenario (100,000 cases) would require 500 additional FTE staff costing approximately £45m
- As of 26 June 2026, FOS holds 84,297 open motor finance commission complaints; has resolved approximately 32,000 cases to date; prevented approximately 150,000 out-of-jurisdiction complaints from being referred
- FOS advises that without an FCA scheme, complaint volumes could reach 1.14 million (6% referral rate based on PPI comparator), requiring 1,300–1,600 additional staff and approximately £600m over four to five years
- DCA (discretionary commission arrangement) complaints account for around 25% of open cases; progress has been delayed by judicial review and ongoing legal challenges to the FCA redress scheme
- FOS agrees with the FCA that an industry-wide approach is the most effective way to address motor finance issues; proposes scaled-fee models and dedicated operational structures to manage potential demand
Tone
FactualTopics
Key actors
Financial Ombudsman Service, Financial Conduct Authority (FCA), Dame Meg Hillier MP, Jenny Simmonds, Clydesdale Financial Services Limited, Supreme Court, Court of Appeal
Notable line
“… an industry - wide approach is the most effective way to address an issue of the scale and complexity of motor finance.”
Key Quotes
“The Financial Ombudsman Service was set up by Parliament under the Financial Services and Markets Act 2000 to resolve individual complaints between financial businesses and their customers fairly and reasonably, quickly and with minimal formality.”
“In a high - volume scenario (for example 100,000 cases), we would require around 500 additional FTE staff at a cost of approximately £45m.”
“As of 26 June 2026, we have 84,297 open motor finance commission complaints, covering both discretionary commission arrangement (DCA) and non - DCA cases.”
“If around half of these potential referrals were received in the first year, we could see approximately 507,000 complaints in 2027/28, with the remaining volume spread across 2028/29 and 2029/30.”
“Handling volumes of this scale would likely require around 1,300-1,600 additional staff over a four - to - five - year period, at a cost of approximately £600m.”
“… we fully recognise the implications this issue may have for our statutory role and are taking the necessary steps to ensure we are across latest developments and have flexible plans established so that we can respond effectively and efficiently in all scenarios.”
Source · parliament.uk record ↗