FOS Finally Acknowledges Consumer Harm in Car Finance Scandal

FOS Acknowledges Consumer Harm — But Will They Deliver?

The Treasury Select Committee's interrogation of the Financial Ombudsman Service (FOS) has confirmed what industry insiders and legal experts have been warning for years: consumers have suffered severe financial detriment due to car finance mis-selling, and they have waited far too long for redress.

In a significant moment during the hearing, Baroness Manzoor, Chair of the FOS, openly admitted that consumers have been harmed by undisclosed commissions and unfair lending practices. For the first time, a regulatory body has acknowledged the scale of financial injustice that has affected millions of car finance customers across the UK.

With 31.7 million finance agreements potentially mis-sold, Moody's estimating £30 billion in lender liabilities, and Treasury now intervening in the Supreme Court case, the redress process is at a critical turning point.

The FOS Acknowledges Consumer Harm — Key Findings

For years, lenders, industry bodies, and even regulators have attempted to downplay the financial damage caused to consumers. But during the hearing, Baroness Manzoor's statement made it official:

• Consumers were charged inflated finance costs due to hidden commissions.
• Millions have been waiting years with no clear path to compensation.
• The regulatory system has moved too slowly, failing to protect consumers in real time.

The key question now is: Will the FOS be able to deliver redress, or will further delays allow lenders to limit payouts?

Why Are Consumers Still Waiting for Compensation?

Despite the acknowledgment of severe consumer detriment, the FCA and FOS have still not provided a clear plan for compensation. Key reasons for the delays:

• The FCA paused lender responses, preventing many claims from progressing.
• The FOS is overwhelmed, with over 60,000 live cases and a backlog growing daily.
• Treasury intervention in the Supreme Court case raises concerns that the government may try to limit redress rather than ensure consumers receive full compensation.

Sentinel Legal's Industry Predictions

1. The Supreme Court Will Determine the Future of Redress

If the Supreme Court rules in favour of consumers, lenders could be forced to pay billions in compensation within months. If the ruling is watered down, more consumers will need to take legal action through the courts.

2. The FOS Will Face Further Pressure, or Be Replaced

MPs are now publicly questioning whether the FOS can handle mass consumer claims. If the backlog grows, a government-led redress scheme may be introduced instead, similar to how PPI was handled.

3. Lenders Will Try to Settle Quickly

Some lenders may offer lower payouts to consumers now rather than wait for full-scale legal challenges. Consumers who act early could receive faster compensation before lenders introduce more legal barriers.

Sam Ward, Director of Sentinel Legal

"For years, regulators have downplayed the severity of this crisis. Now, Baroness Manzoor has admitted what consumers already knew — there has been severe financial harm, and they have been waiting too long for justice."

Did Abby Thomas Leave Over Car Finance Redress?

The Treasury Select Committee's letter to Baroness Manzoor further increases pressure on the FOS, demanding answers about the departure of CEO Abby Thomas.

Key questions raised by Parliament:

• Did Abby Thomas receive a severance package?
• Was she restricted from speaking freely about her resignation?
• Did the FOS Board express concerns about her leadership before she left?

If the FOS forced out its CEO over car finance redress disputes, consumers need to ask: Is the regulator truly on their side, or is it more focused on limiting compensation payouts?