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ADR – what is it and why is it important?

Man holding pad with 'What is alternative dispute resolution?' at the top and a picture of a law book and gavel at bottom.

The Motor Ombudsman (TMO), an ADR provider in the motor retail space, has urged car buyers to choose the dealership they buy from carefully. The warning has been timed to coincide with the new March plate which usually leads to an increase in both new and used vehicle orders.

ADR stands for Alternative Dispute Resolution, a process that enables a dispute to be resolved without the need to resort to the legal system. ADR is very important in the automotive sector because buying and maintaining a car is a big investment. If something goes wrong it helps to have the ability to complain to an ADR provider who can investigate the issue impartially and act to ensure any issues are put right. So ADR effectively helps to drive buyer confidence in markets and provides a mechanism for recourse where things go wrong.

ADR complications

ADR can be a little complex in the motor retail space. There are two main industry ADR providers that could accept a complaint depending on the circumstances. We’ve already mentioned TMO above, but you can also complain to the Financial Ombudsman Service (FOS) if your car is purchased on finance or leased. In fact if you have ever had to make a complaint about your financed car you will know that the finance provider is often the organisation that initially handles the complaint – even though they had very little to do with selling the car to you. It is a regulatory requirement for lenders and retailers to make customers aware of their right to complain to the FOS when they enter into a finance or lease agreement.

TMO vs FOS

The TMO is a voluntary ADR scheme. By this we mean that you cannot make a complaint to the TMO unless the retailer or garage you are complaining about has signed up to one of its Codes of Practice. The TMO covers complaints relating to several types of automotive services such as vehicle sales, MOTs and repairs and warranty/insurance services. You can check which businesses in this space are ‘accredited’ on the TMO website here. The TMO doesn’t have any legal powers to make its accredited businesses take action, but it can highlight to them what the legal requirements are where these have not been met. It can also cause reputational damage to retailers and garages that consistently fail customers by removing their accreditation and ‘naming and shaming’ those that have fallen from grace.

The FOS on the other hand provides a mandatory ADR scheme and is a statutory dispute resolution provider. Generally all customers that have entered into a regulated motor finance agreement, lease or insurance product (financial service) have a right to complain to the FOS. But the FOS will not accept a complaint if you bought a vehicle outright or are using an unregulated finance product (typically where you are a business not a consumer). The FOS is not limited to just investigating issues relating to the finance or insurance element of the sale, it will also accept complaints relating to the satisfactory quality of the vehicle e.g. faults or condition / features not as advertised or sold etc.

Who to complain to and the complaints process

ADR providers

If you encounter an issue with your vehicle then you first need to take it up with the retailer. If the retailer has been accredited by the TMO then they have 8 weeks to provide a satisfactory response to your complaint. If they don’t, or they take longer than 8 weeks to respond, then you can escalate to the TMO. If you financed the car then the same 8 weeks applies but the dealer will usually forward the complaint to the lender to handle or you can complain directly to them. Again, after 8 weeks you can escalate to the FOS if you are not satisfied with the response. If the TMO is an option then they are much more qualified at dealing with satisfactory quality complaints about the vehicle and will provide a quicker response. But the FOS has more power to leverage any redress or compensation given its statutory footing, but it currently takes a long time to investigate and make a decision.

Trade body ADR schemes

The motor finance, lease and car rental trade bodies also provide ADR schemes. The Finance & Leasing Association’s Business Finance Code complaint scheme can be accessed by business finance customers where the lender or lessor has signed up to the Code. The British Vehicle and Rental Association’s (BVRLA) ADR scheme is available to customers that have taken out a lease or rental agreement with one of the BVRLA’s members. The FLA and BVRLA will only accept complaints if the case is not already open with another ADR provider.

Finding credible retailers

Cars are complicated beasts and whether new or old things can go wrong with them. So if you are looking to buy from a retailer here are some kitemark schemes which you should consider:

As always make sure you run a vehicle provenance check on the vehicle you are looking to buy unless the retailer provides you with a copy of the report.

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