Not upheld: undisclosed commission and excessive default charges complaint against Advantage Finance Limited

Decision detail

Summary

Mr M complained to the Financial Ombudsman Service about a motor finance hire purchase agreement entered into with Advantage Finance Limited in October 2018, alleging that Advantage failed to disclose a £600 commission payment to the finance broker and applied excessive fees and charges when he missed payments. The ombudsman found that although the commission was not disclosed, the fixed £600 payment represented less than 6.1% of the loan amount and was not a discretionary commission arrangement, making it unlikely a court would find the lending relationship unfair under s140 CCA. Regarding charges, Advantage had already offered a refund of £72 plus interest for six unfairly applied arrears management fees under an FCA remediation program, which Mr M accepted, and the remaining two charges were found to be fair and in line with industry norms. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's decision in Hopcraft, Johnson & Wrench, which established that motor finance lending relationships could be unfair where there was a discretionary commission arrangement (DCA), high commission relative to the amount borrowed, or commercial ties between lender and broker. In Mr M's case, the £600 commission was a fixed amount (not a DCA), represented less than 6.1% of the amount borrowed and 9.01% of the total cost of credit (not high), and there was no evidence of commercial ties between Advantage and the broker. The ombudsman concluded it was more likely than not that a court would not find the lending relationship unfair under s140 CCA. Regarding charges, the ombudsman found that Advantage had already offered fair redress under the FCA remediation program, and the two remaining charges were properly disclosed and in line with industry norms.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website