The recent criticism of Mercedes-Benz Financial Services (MBFS) by the Financial Ombudsman Service (FOS) underscores a troubling trend in the motor finance sector. According to the FOS, MBFS handled a motor finance dispute "very poorly", leaving a customer's vehicle with significant electrical faults that posed a "serious safety risk". The case highlights the need for greater accountability among finance providers in addressing consumer complaints.
The dispute began in February 2025 when the customer reported critical issues with the car's brake assist and battery, requesting to return the vehicle. MBFS initially refused, citing a manufacturer-approved garage had resolved the problem with a software update, although the problems persisted. The FOS dismissed this argument as "misguided", pointing out that the car's electrical problems could impact its safety.
The ombudsman further criticised MBFS for its handling of the dispute, stating it was a "fundamental failure to engage appropriately" with the issues and potential liability under the Consumer Rights Act (CRA). The FOS highlighted that MBFS's stance on the six-month time limit for warranty claims was also flawed.
Following months of negotiations, MBFS conceded that compensation was due, but an agreement on the amount could not be reached. During this period, the customer continued to drive the car, experiencing a harrowing incident in November 2025 where "the brakes applied automatically while he was driving", potentially resulting in a serious accident.
Ultimately, the FOS ordered MBFS to refund 50 per cent of all monthly payments made, the customer's initial deposit of £2,100, an additional £475.20 for extra work, and £500 for the "distress and inconvenience caused". This incident comes as Mercedes-Benz is challenging the Financial Conduct Authority's (FCA) £9bn redress scheme, which addresses mis-selling in car finance through undisclosed commission agreements between dealers and lenders. The company has provisioned £400m for this wider scandal.
A spokesperson for Mercedes-Benz stated, "Mercedes-Benz Financial Services are committed to treating customers fairly and complying with the regulatory framework under which we operate. Where matters are referred to the FOS, we fully engage with the process and abide by its decisions."