Not upheld: irresponsible lending and undisclosed broker commission complaint against Advantage Finance Limited

Decision detail

Summary

Mr and Mrs T complained that Advantage Finance unfairly lent to them by entering into an unaffordable hire-purchase agreement for a £9,500 car loan in July 2017, and failed to disclose a £550 commission paid to their credit broker. The ombudsman found that although Advantage Finance did not provide evidence of proportionate affordability checks, the borrowers' financial circumstances suggested they could sustain the £302.30 monthly payments. Regarding the commission, the ombudsman applied the Supreme Court's Hopcraft test and concluded the fixed £550 payment (less than 6% of the loan amount) was unlikely to be considered high, involved no discretionary arrangement allowing interest rate manipulation, and no commercial tie existed. The complaint was not upheld.

The Ombudsman's reasoning

Although Advantage Finance failed to provide evidence of proportionate affordability checks, the ombudsman concluded that reasonable checks would likely have shown the borrowers could afford the payments based on their disclosed financial circumstances and the £1,500 deposit paid. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £550 commission (less than 6% of amount borrowed and 6.5% of total credit cost) was unlikely to be considered high, involved no discretionary arrangement, and no commercial tie existed. Therefore, disclosure would unlikely have materially affected the borrowers' decision.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website