Not upheld: undisclosed commission and alleged unfair relationship under Section 140 Consumer Credit Act 1974 complaint against Oodle Financial Services Limited

Decision detail

Summary

Mr Y complained that Oodle Financial Services failed to disclose a £933.38 commission paid to the credit broker that introduced his hire-purchase agreement for a £13,334 car, arguing this created an unfair lending relationship. The ombudsman applied the Supreme Court's recent judgment in Hopcraft, Johnson & Wrench, which established specific circumstances where undisclosed commission renders a relationship unfair. Finding that the commission was fixed (not discretionary), modest in proportion to the loan (7%) and total credit cost (11%), and that no commercial tie existed between broker and lender, the ombudsman concluded it was unlikely a court would find the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which established that an undisclosed commission could render a lending relationship unfair only in specific circumstances: where there was a discretionary commission arrangement, where the commission was high relative to the cost of credit or amount borrowed, or where a commercial tie existed. In this case, none of these factors were present. The £933.38 commission represented 7% of the amount borrowed and approximately 11% of the total cost of credit, which was not considered high. The absence of a DCA meant there was no direct link between the commission and the interest rate Mr Y paid. No commercial ties existed between the broker and Oodle. Therefore, it was unlikely a court would find the relationship unfair despite the non-disclosure.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website