Not upheld: undisclosed broker commission in motor finance complaint against Advantage Finance Limited

Decision detail

Summary

Mr Y complained that Advantage Finance unfairly failed to disclose a £700 commission paid to the credit broker that introduced him, arguing this created an unfair lending relationship. In August 2017, Advantage Finance provided hire purchase finance of £7,049.00 for a used car with total charges of £5,434.40 over 60 months. The ombudsman applied the Supreme Court's Hopcraft decision and found the complaint not upheld because the commission was fixed (not discretionary), represented only 9.9-13% of the transaction value (not high), and no commercial tie existed between the broker and lender. The ombudsman concluded that a court would unlikely find the undisclosed commission rendered the relationship unfair under Section 140 of the Consumer Credit Act 1974.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's decision in Hopcraft, Johnson & Wrench, which identified three circumstances where undisclosed broker commission could render a lending relationship unfair: discretionary commission arrangements, high commission relative to borrowing, and commercial ties. The ombudsman found none of these circumstances applied here: the £700 was a fixed commission (not discretionary), represented only 9.9-13% of the transaction value (not high), and no contractual commercial ties existed between the broker and lender based on review of multiple broker agreements.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website