Not upheld: Motor finance commission (DCA) complaint against Oodle Financial Services Limited (trading as Oodle Car Finance)

Decision detail

Summary

Mr R complained that Oodle Financial Services failed to disclose a £1,274.58 commission paid to the credit broker that introduced his business, arguing this created an unfair lending relationship. In July 2019, Oodle provided Mr R with a 60-month hire-purchase agreement for £14,995.00 at 18.1% APR with total charges of £7,222.80. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that while the commission was not disclosed, it was unlikely a court would find the relationship unfair because the commission was fixed (not discretionary), represented only 8.5% of the loan amount and 17.5% of total credit cost (not high), and no commercial tie existed between the broker and lender. 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 only in specific circumstances: where there was a discretionary commission arrangement, the commission was high relative to the cost of credit, or a commercial tie existed. In this case, none of these factors were present. The commission was fixed at 8.5% (£1,274.58), representing 17.5% of the total cost of credit, which was not considered high. No discretionary arrangement existed, so the broker had no discretion to set the interest rate. No commercial tie was found between the broker and Oodle. Therefore, even though the commission was not disclosed, it was unlikely a court would find the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website