Not upheld: Motor finance commission (DCA) complaint against Advantage Finance Limited

Decision detail

Summary

Mr M complained that Advantage Finance failed to act fairly by not disclosing the £856.89 commission it paid to the credit broker who introduced him, arguing this created an unfair lending relationship. In January 2022, Mr M entered into a hire-purchase agreement for a £6,990 car with total charges of £7,865 over 60 months at 40.42% APR. The ombudsman applied the Supreme Court's Hopcraft test and found the complaint not upheld because the commission was fixed (not discretionary), represented only 13% of the amount borrowed and 11% of total credit cost (not high), and no commercial tie existed between the broker and lender. The ombudsman concluded that even if disclosed, the commission amount would not have been a major consideration for Mr M given he accepted the high APR.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's Hopcraft test, which requires three elements for an unfair relationship: a discretionary commission arrangement, a high commission relative to borrowing, and a commercial tie. The ombudsman found none of these elements were present: the commission was fixed (not discretionary), at 13% of the amount borrowed and 11% of total credit cost was not high, and no commercial tie existed. The ombudsman reasoned that even without disclosure, knowledge of the £856.89 commission would not have been a major consideration for Mr M given he accepted a 40.42% APR 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