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 P complained that Oodle Financial Services failed to disclose a £1,020.00 commission paid to the credit broker that introduced his business, arguing this created an unfair lending relationship under Section 140 of the Consumer Credit Act 1974. In July 2019, Oodle provided Mr P with hire-purchase finance for a used car at 18.2% APR, with the broker receiving a fixed 10% commission on the amount lent. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that while the commission was undisclosed, it was unlikely a court would find the relationship unfair because the commission was fixed rather than discretionary, was not high relative to the loan amount, and no commercial tie existed. 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 commission was high relative to the cost of credit, or where a commercial tie existed. In this case, none of these factors were present. The commission was fixed (not discretionary), was not high at 10% of the amount borrowed and 20% of total credit cost, and no commercial tie existed. The ombudsman concluded it was unlikely a court would find the relationship unfair, particularly given Mr P knew and accepted the 18.2% APR when signing the agreement.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website