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

Decision detail

Summary

Mr D complained that Oodle Financial Services failed to disclose a £1,485.00 commission paid to the credit broker that introduced his hire-purchase agreement for a £16,500 car, arguing this created an unfair lending relationship. The ombudsman applied the Supreme Court's recent judgment in Hopcraft, Johnson & Wrench, which identified three circumstances where undisclosed commission could render a relationship unfair: discretionary commission arrangements, high commissions relative to the credit cost, or commercial ties between broker and lender. Finding none of these factors present—the commission was fixed, represented only 9% of the loan and 20% of total credit cost, and no commercial tie existed—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 undisclosed commission could render a lending relationship unfair under Section 140 CCA only in specific circumstances: where there was a discretionary commission arrangement, where the commission was high relative to the cost of credit, or where there was a commercial tie. In this case, none of these factors were present. The commission was fixed at £1,485.00 (9% of amount borrowed, 20% of total credit cost), which was not high; there was no discretionary arrangement giving the broker control over the interest rate; and there was no commercial tie. The ombudsman concluded that even if disclosed, knowledge of this commission would not have been a major consideration for Mr D given he accepted an APR of 16.2% and there was no direct link between the commission and the interest rate he paid.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website