Not upheld: undisclosed commission in motor finance / unfair relationship under Section 140 Consumer Credit Act 1974 complaint against Oodle Financial Services Limited (trading as Oodle Car Finance)

Decision detail

Summary

Miss S complained that Oodle Car Finance failed to act fairly by not disclosing a £330.88 commission paid to the credit broker who introduced her hire purchase agreement for a £3,008.00 car loan. She argued the undisclosed commission created an unfair lending relationship under Section 140 of the Consumer Credit Act 1974. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that although the commission was undisclosed, it was unlikely to render the relationship unfair because it was a fixed (not discretionary) commission, represented less than 15% of total charges, and no commercial tie existed between the broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's three-part test from Hopcraft, Johnson & Wrench to determine whether undisclosed commission rendered the relationship unfair. The commission did not involve a discretionary commission arrangement (so the broker had no discretion over interest rates), was not high relative to the amount borrowed or cost of credit (less than 15% of total charges), and no commercial tie existed between the broker and lender. Therefore, even though undisclosed, the commission was unlikely to have been a major consideration that would have changed Miss S's decision to enter the agreement.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website