Not upheld: irresponsible lending / unfair relationship due to undisclosed commission complaint against First Response Finance Limited (FRFL)

Decision detail

Summary

Mr G complained that FRFL treated him unfairly by failing to disclose a £608.08 commission paid to the motor dealer who introduced his hire purchase agreement for an £8,644 car, and that this may have influenced his interest rate. He also complained about an inflated car price including warranty costs. FRFL upheld the complaint in part regarding the warranty but maintained the commission was disclosed and offered compensation. The ombudsman applied the Supreme Court's Hopcraft test for motor finance commission cases and found the complaint not upheld, as the commission involved no discretionary arrangement, was not high relative to the credit cost (7% of amount borrowed), and no commercial tie existed between FRFL and the dealer. The ombudsman also rejected Mr G's vulnerability claim, noting FRFL had no knowledge of his gambling-related issues as he had not disclosed them.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which identifies three key factors that could make a motor finance relationship unfair: discretionary commission arrangements, high commission relative to credit cost, and commercial ties. The ombudsman found none of these factors were present. The commission of £608.08 represented only 7% of the amount borrowed and 9.81% of total credit cost, which was not high. There was no discretionary commission model, and no evidence of commercial ties between FRFL and the motor dealer. Regarding Mr G's vulnerability claim, the ombudsman noted there is no automatic requirement for lenders to ask about vulnerability in all cases, and Mr G had not disclosed his circumstances to FRFL.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website