Not upheld: irresponsible lending and undisclosed commission complaint against First Response Finance Limited

Decision detail

Summary

Miss C complained that First Response unfairly entered into a hire-purchase agreement for a used car, arguing that proportionate affordability checks were not conducted and the finance was unaffordable. She also complained that First Response failed to disclose a £401.72 commission paid to the credit broker. The ombudsman found that while First Response's checks were not proportionate, reasonable checks would have shown the repayments were sustainable given Miss C's income and living expenses. Regarding the commission, the ombudsman applied the Supreme Court's Hopcraft test and concluded the commission was not high relative to the amount borrowed and did not involve a discretionary arrangement or commercial tie, therefore the lending relationship was not unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman acknowledged that First Response's checks were not proportionate given the term of the agreement, its total cost, and Miss C's previous credit difficulties. However, the ombudsman concluded that if First Response had carried out reasonable and proportionate checks using Miss C's actual living expenses information, the data showed she would have had sufficient funds to sustainably make the repayments. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £401.72 commission did not involve a discretionary commission arrangement, was not high relative to the amount borrowed (4.5%) or cost of credit (less than 7.5%), 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