Not upheld: irresponsible lending and undisclosed commission in motor finance complaint against Advantage Finance Limited

Decision detail

Summary

Mr E complained that Advantage Finance unfairly entered into a hire-purchase agreement for a £9,990 car in March 2019 with unaffordable monthly payments of £317.61, and that the firm failed to disclose a £950 commission paid to the credit broker. The ombudsman found that while Advantage Finance's enquiries were not sufficiently thorough, Mr E's income appeared sufficient to sustain the repayments when actual living expenses were deducted. Regarding the commission, the ombudsman applied the Supreme Court's test from Hopcraft and found the fixed £950 payment was unlikely to render the relationship unfair because it was not discretionary, represented only 9.5-10% of the credit cost, and there was no evidence of a commercial tie. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while Advantage Finance's enquiries into Mr E's circumstances were not thorough enough, further enquiries would not have prevented the lender from providing the funds. When Mr E's actual living expenses and existing credit commitments were deducted from his income, he appeared to have sufficient funds to sustainably make the repayments. Regarding the commission, the ombudsman applied the Supreme Court's test from Hopcraft and found that: (1) the £950 was a fixed commission, not a discretionary arrangement; (2) at 9.5-10% of the amount borrowed and cost of credit, it was unlikely to be considered high; and (3) 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