The Finance & Leasing Association has defended motor finance lenders following a damning report by the Financial Ombudsman Service (FOS).

In the 2010-11 financial year the FOS handled a record 206,000 formal complaints – up 26% on 2009-10 – and 51% were about mis-selling payment protection insurance (PPI). The biggest banking groups – Barclays, Lloyds, RBS and HSBC – accounted for 51% of all cases dealt with by the FOS.

The 105,000 PPI complaints were a record for any type of financial policy in a single year, says the FOS, which was set up 10 years ago. It deals with problems that financial businesses have failed to resolve.

Paul Harrison, FLA head of motor finance, said: “The FLA takes complaints very seriously and acts as a mediator. The FOS report stated that firms’ complaint handling procedures had improved, and HP and unsecured loan complaints fell in 2010-11.

“Anecdotally, we usually find complaints about motor finance are low and that consumers are happy with their finance deals.

“FLA members are putting in place procedures to deal with the new PPI rules. They are also working with the FOS and the FSA to make sure all past issues and concerns are resolved.”

Natalie Ceeney, FOS chief executive, said: “We have been able to resolve four out of five problems and enquiries by giving advice to more 800,000 people.

"But we have still had more consumers come to us with formal unresolved disputes than in any previous year.”

Sarah Brooks, Consumer Focus head of financial services, said: “The banks’ battle to dodge their PPI responsibilities has damaged the industry’s reputation.

"We urge banks to deal promptly with complaints.”