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

Decision detail

Summary

Mr M complained about a hire purchase agreement entered into with Advantage Finance Limited in October 2016 for a used car, raising concerns about inadequate affordability checks and an undisclosed £500 commission payment to the finance broker. The ombudsman found that while Advantage's income verification lacked supporting documentation, a proportionate check would have confirmed Mr M's average income of approximately £1,350 monthly with fixed expenditure of around £540, leaving sufficient disposable income to cover the £182.89 monthly repayments. Regarding the commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £500 flat-rate payment was not a discretionary commission arrangement and would not have been a key consideration for Mr M given his limited credit options. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while Advantage's income verification check lacked supporting documentation, a proportionate check would have shown Mr M's income averaged around £1,350 per month. With fixed expenditure of approximately £540, Mr M would have had around £810 in monthly disposable income after fixed costs, which was sufficient to cover the £182.89 monthly repayments. Even if more in-depth checks were required due to limited credit history, the outcome would have been the same. Regarding the undisclosed commission, the £500 flat-rate payment was not a discretionary commission arrangement, represented less than 9.5% of the amount borrowed, and would not have been a key consideration for Mr M given his limited options for obtaining credit. The ombudsman applied the Supreme Court's Hopcraft test and found none of the three unfair circumstances were present.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website