Not upheld: undisclosed credit broker commission and alleged unfair relationship complaint against Advantage Finance Limited

Decision detail

Summary

Mr K complained that Advantage Finance failed to act fairly by not disclosing the £459.36 commission it paid to the credit broker that introduced his hire purchase agreement for a £4,000 car loan in April 2022. The ombudsman applied the Supreme Court's recent judgment in Hopcraft, Johnson & Wrench, which established three conditions that must be met for motor finance commission to create an unfair relationship. Finding that none of these conditions were present—the commission was fixed not discretionary, represented only 11% of the amount borrowed, and there was no commercial tie—the ombudsman declined to uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which requires three conditions for an unfair relationship: a discretionary commission arrangement, a high commission relative to the cost of credit, and a commercial tie. The ombudsman found that none of these conditions were met. The commission was fixed (not discretionary), at 11% of the amount borrowed and 26% of total credit cost (not high), and there was no evidence of a commercial tie between the broker and lender.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website