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

Decision detail

Summary

Miss S complained that Oodle Financial Services Limited failed to act fairly by not disclosing that it paid her broker a commission of £1,228.95 when she entered into a hire purchase agreement for a car in August 2018. 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 while the commission was undisclosed, none of the circumstances that would render the relationship unfair were present: there was no discretionary commission arrangement, the commission was not high relative to the amount borrowed, and no commercial ties existed between Oodle and the broker. The ombudsman concluded the APR of 12.2% was not unreasonable and that Miss S would likely not have reached a different decision had the commission been disclosed. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which established that undisclosed commission could render a lending relationship unfair under Section 140 CCA only in specific circumstances: where there was a discretionary commission arrangement, the commission was high relative to the amount borrowed, or a commercial tie existed. In this case, none of these factors were present. The commission of £1,228.95 represented 10% of the amount borrowed and approximately 31% of the total cost of credit, which was not considered high. There was no discretionary commission arrangement, so the broker had no discretion to set the interest rate. No commercial ties existed between Oodle and the broker. The APR of 12.2% was not inherently unreasonable, and Miss S continued making repayments without raising concerns about the original terms. The ombudsman concluded it was unlikely a court would find the undisclosed commission rendered the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website