What Is the Financial Ombudsman Service and When Can It Help With Car Finance Claims?

If you have complained about your car finance and the lender has said no, you may be asking what the Financial Ombudsman Service actually does and if they can help with your complaint.

Mis-Sold Expert explains what the Financial Ombudsman Service is, how the process works, and when they may help with a PCP or Hire Purchase complaint.

Understanding the Financial Ombudsman Service

What is the Financial Ombudsman Service?

The Financial Ombudsman Service (FOS), is an independent public body set up by the government. Its role is to resolve disputes between consumers and regulated financial firms in the UK and covers a wide range of products, including:

• Personal Contract Purchase agreements
• Hire Purchase agreements
• Loans and credit cards
• Insurance policies

The service is free for consumers. It is funded by levies and case fees paid by financial firms.

Importantly, the Ombudsman does not represent you or the lender; they act as an intermediary, reviewing both sides of the dispute and deciding what is fair and reasonable. In doing so, it considers the law, Financial Conduct Authority rules, guidance and industry standards that applied at the time.

When Can You Contact the Financial Ombudsman Service?

Do you have to complain to the lender first?

Yes. You cannot usually go straight to the Ombudsman.

First you should raise a formal complaint with the lender. They then have up to eight weeks to investigate and issue a final response explaining whether your complaint is upheld and what redress, if any, is being offered.

You can refer your complaint to the Financial Ombudsman Service if:

• You receive a final response and disagree with the outcome
• Eight weeks pass and you have not received a final response

In most cases, you must contact the Ombudsman within six months of the date on the lender’s final response letter.

What Car Finance Issues Can the Ombudsman Review?

Can it look at commission and interest rates?

Yes, if those issues form part of your complaint.

In car finance cases, the Financial Ombudsman Service commonly reviews concerns about:

• Undisclosed commission, including discretionary commission arrangements
• Interest rates that may have been increased to generate higher commission
• A lack of clear explanation about total cost of credit
• Inadequate affordability checks

For example, if you were not told that the dealer could adjust your interest rate within a set range, the Ombudsman may assess whether that affected the amount you paid.

If you believe the agreement was not affordable at the time and proper checks were not carried out, that can also be considered.

Each case is reviewed individually with no guaranteed outcome.

How the Financial Ombudsman Process Works

What happens after you refer your complaint?

Once you have issued your complaint, the Ombudsman first checks that it falls within its jurisdiction. If it does, it is usually assigned to an investigator.

The investigator gathers information from you and the lender including:

• The finance agreement
• Commission arrangements in place at the time
• Sales notes or recordings
• Your financial circumstances at the time of the agreement

After reviewing the evidence, the investigator issues an initial view.

If both sides accept, the case ends there. If either side disagrees, the complaint can be referred to an Ombudsman for a final decision.

Is the decision binding?

If you accept the final decision, it is legally binding on the lender. If you choose not to accept it, you may consider other options such as court action. The Ombudsman’s role is to offer an independent resolution without the cost of litigation.

What Can the Ombudsman Award in Car Finance Complaints?

How is compensation decided?

If your complaint is upheld, the FOS can require the lender to put things right.

In car finance cases, this may include:

• Refunding some of the interest you paid
• Refunding commission that was not disclosed properly
• Recalculating the agreement on a fairer basis
• Adding statutory interest where appropriate

The aim is to place you in the position you should have been in if the problem had not occurred. It’s not designed to punish the lender or provide compensation unrelated to financial loss.

There are also limits to how much the Ombudsman can award, depending on when the complaint was made and the rules in force at that time.

How Long Does a Financial Ombudsman Complaint Take?

There is no fixed timeframe when it comes to issuing a complaint through the Financial Ombudsman..

Straightforward cases may be resolved quickly. More complex complaints, especially those involving commission models or detailed affordability assessments, can take longer.

The Ombudsman will usually provide updates as your case progresses. While the process can take time, it’s free and structured avoiding the costs associated with court proceedings.

Is Referring Your Case the Right Step?

You might consider contacting the Financial Ombudsman Service if:

• The lender rejected your complaint and you believe the decision is wrong
• The lender made an offer that does not reflect the issue properly
• You did not receive a final response within eight weeks

Before referring to your complaint, read the lender’s final response carefully. Make sure you understand their reasoning. The Ombudsman will review the evidence independently, not simply overturn a decision because you disagree with it.

Why the Financial Ombudsman Service Matters in Car Finance

Car finance complaints, particularly those linked to discretionary commission arrangements, have attracted increased attention in recent years. As more consumers review past agreements, the role of the Financial Ombudsman Service has become more visible.

For consumers, it provides an independent route if a complaint is not resolved at firm level. For regulated lenders, its decisions help shape standards of fairness and transparency.

If you are considering a complaint about mis-sold PCP or HP finance, understanding how and when the Financial Ombudsman Service can help give you a clearer view of your options. It does not guarantee a different result, but it ensures your complaint is assessed independently and fairly.

You can claim without using a claims management company; you can go to your finance provider and then to FOS, for free. Additionally, the FCA is introducing a free consumer redress scheme.