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

Ms L complained that Oodle Financial Services Limited failed to act fairly by not disclosing a £1,055.47 broker commission paid when she entered into a hire purchase agreement for a used car in May 2019. She argued the undisclosed commission created an unfair lending relationship and resulted in an unfairly high interest rate. 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 (not discretionary), represented only 13% of the amount borrowed, 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 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 was fixed (not discretionary), represented 13% of the amount borrowed and 26% of the total cost of credit (not high), and no commercial tie existed between the broker and lender. Therefore, even though the commission was undisclosed, it was unlikely a court would find the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website