Investigating complaints brought forward by islanders who think they may have been mis-sold car finance will be “one of the big issues” handled by the Channel Islands Financial Ombudsman this year.
CIFO chief executive Douglas Melville provided the update shortly after the Jersey Consumer Council announced that it has created template letters that consumers can download, fill out and send to car dealers and finance providers.
The letters, which are available on the JCC website, are intended to help customers find out whether commission was paid on their motor finance and whether that commission may have influenced the interest rate or terms of the loan.
It follows controversy surrounding discretionary commission arrangements, which started to gather speed at the start of 2024 when the UK’s Financial Conduct Authority announced a review into whether motor finance customers had been overcharged as a result of their historic use.
The industry-wide scandal relates to a long-standing practice where the broker – often a car dealer – could adjust the interest rate being offered to obtain a higher commission.
The FCA revealed last year that it had found “widespread failures to adequately disclose the existence and nature of commission and contractual ties between lenders and brokers” and that many consumers “may have overpaid” as a result.
JCC chair Carl Walker has previously stated that the organisation was looking into the potential implications for consumers in the Channel Islands, given the “structural and commercial similarities in the way vehicle finance is offered” and “the common practice of using UK-based finance companies and brokers”.
In November, Mr Melville said that motor finance complaints were “absolutely within our mandate” and that his office was already aware of “a few” local cases.
Speaking to Express this morning, he said that “more complaints have arisen in this specific space”.
Mr Melville continued: “I would attribute that very much to what Carl and the JCC have been taking on in terms of their perception of this as a consumer issue.
“They have spoken to us about our mandate and how it works and how they can assist customers who are raising concerns.
“Some are still with them in conversation, some are taking advantage of what Carl and his team are doing with their website and making available templates to help customers articulate their concerns, so that they basically are given some guidance as to how to approach their provider to ask the right questions and to gather the right information so that they can decide whether or not they have the basis of a complaint to make.”
Mr Melville noted that consumers first had to lodge a complaint with the provider before approaching the Channel Islands Financial Ombudsman.
“That allows the providers also to articulate, from their perspective, what the dealings were, how the customer was treated at that relevant time and to give them an opportunity to consider the complaint, whether it’s valid or not from their perspective.
“If they provide the customer with a written decision that says, no, we don’t agree with you, the customer can bring it to us.
“If there’s radio silence from the provider, after three months the customer can bring it to us whether they have an answer or not, and at that point we will take a look.”
In some cases, the concerns may not have merit, but where they do, I would wish that they would all have had an opportunity for a fair and free review by an impartial service like our office.
CIFO chief executive Douglas Melville
He highlighted that not all of the complaints would fall within CIFO’s remit, with the current scope encompassing agreements drawn up after 1 January 2010.
“Then there’s the other questions, of course, which is what goes to the merits of these complaints? Because in Jersey, there’s still no regulation in place for non-bank lending and credit.
“It’s been an unregulated area through all these years. Our mandate has applied, but we’ve had complaints which come to us for which there’s really no regulatory benchmark.
“We’ve been making our decisions based on the test in our law, which is what’s fair and reasonable in the circumstances of the individual complaint.
“Now going forward, we may well have very soon a regulatory framework in Jersey to work with for lending and credit, but it will not be retrospective.”
Mr Melville explained that CIFO was “in the process now of digging in deep on these initial cases, to develop a general approach that will likely guide us through the balance of them as they emerge over time”.
He added: “But I think the JCC’s efforts have been very helpful, educating the consumers in the island, helping guide them as to how to take the appropriate action with their provider, which sets them up for being able to avail themselves of our process and service at the appropriate time, once the firm has had a legitimate opportunity to address the concerns.
“And in some cases, the concerns may not have merit, but where they do, I would wish that they would all have had an opportunity for a fair and free review by an impartial service like our office.
“That’s what we were created for.”
Mr Melville also said he anticipated that “this will be one of the big issues we wrestle with in 2026”.