Fears of mis-selling scandal after surge in complaints over car loans

CONTROVERSIAL car hire-purchase deals are now among the most complained about consumer credit policies, figures show.

Personal contract purchases (PCP) are often offered with few financial checks, allowing motorists to drive away in new cars after paying as little as a £319 deposit. They are often sold by forecourt salesmen, working on commission, leading to concerns that this could lead to the next major mis-selling scandal.

The 64 per cent rise in complaints lodged with the Financial Ombudsman Service (FOS) comes as it emerged Britons spent £3.6billion on car loan deals in March alone, up 13 per cent on the previous year.

Motorists can be offered loans worth more than their own salaries under the hire purchase agreements, which now account for nine in ten car sales.

‘Irresponsible’ car loans are to be probed by watchdogs amid suggestions drivers should be made to pass affordability tests such as those taken when negotiating a mortgage.

Complaints about hire purchase policies, the vast majority of which are about cars, rose by 64 per cent with 5,0 9 complaints in 016/17 compared with 3,07 the previous year. The number of complaints had risen by 73 per cent the previous year, from 1,784 to 3,07 .

The policies were the third most complained about consumer credit product in 016/17 – behind payday loans and credit agency reports, which the FOS reported had also risen.

There were 10,5 9 complaints about payday loans received by the service in 016/17, compared with 3, 16 in 015/16. About 59 per cent – of payday loan complaints were upheld in consumers’ favour in 016/17. Overall, there were 5,984 complaints about consumer credit products and services in 016/17, compared with 13,713 the previous year.

This is despite a huge clampdown on payday lenders in recent years, with firms now having limits on the amount of times they can roll a loan over and the interest they can charge, to stop borrowers sinking into a debt spiral.