ILC ARTICLE

FOS warns of credit hire risks

19th July 2023

The Financial Ombudsman Service (FOS) has warned consumers of the risks of credit hire suggesting they could face bills of tens of thousands of pounds.

The warning highlights that if a claims or accident management company cannot recover costs from the other driver’s insurer, under the term of the credit agreement they can recoup the costs from the consumer.

Rachel Lam, Ombudsman Director at the Financial Ombudsman Service, said: “Consumers and insurers can be subject to huge costs when credit hire is used. People have told us that they would never knowingly have chosen credit hire had they known the risks of having to pay the costs involved themselves.

“Others believed they were still dealing with their own insurer, and it wasn’t made clear to them that they’d been passed to a credit hire provider in the first place.

“We would urge industry to take an approach which is balanced, fair and transparent – putting consumers at the heart of their thinking.”

The Financial Ombudsman said it has been told by many motorists that the terms of their credit hire agreements were unclear – not only did they not know they could end up paying costs themselves, but they were unaware they were not using their own car insurance policy.

It has also heard from consumers who are unhappy and frustrated with the repairs carried out by the credit hire company.

While the Financial Ombudsman is unable to look directly at the actions of an AMC, it can investigate complaints about the way insurers and brokers have referred consumers to credit hire agreements.

In many of the cases that it sees, the Financial Ombudsman said that the referrals aren’t balanced and don’t give policyholders enough information to make an informed choice on whether to use credit hire and the implications this may have.

The Financial Ombudsman is working with the industry to improve referrals – making them fair, balanced and transparent. It believes industry should consider the wider implications of credit hire, including the impact on the ‘at fault’ driver’s insurer who can also be hit with significant bills.