Advantage Finance Limited · DRN-4624507

Complaint Mr Y complains that Advantage Finance Limited (“Advantage Finance”) failed to act fairly and reasonably towards him when entering into a hire purchase agreement with him. He’s said that Advantage Finance failed to disclose the commission it paid to the credit broker that introduced him to Advantage Finance and that this created an unfair relationship because of the impact this had on the interest he had to pay. Background In August 2017, Advantage Finance provided Mr Y with finance for a used car. The purchase price of the car was £7,299.00. Mr Y paid a deposit of £250 and entered into a hire-purchase agreement with Advantage Finance for the remaining £7,049.00. The loan had interest, fees and charges of charges of £5,434.40 (made up of interest of £4,934.40, an acceptance fee of £325 and an option to purchase fee of £200) and a 60- month term. This meant that the balance to be repaid of £12,483.40 (not including Mr Y’s deposit) was due to be repaid in 59 monthly instalments of £205.14 followed by a final monthly instalment of £380.14. Advantage Finance didn’t uphold the complaint. It said that its checks confirmed that the finance was affordable and so it was reasonable to lend. Furthermore, it didn’t think that it had acted unfairly when paying commission to Mr Y’s credit broker. Mr Y’s complaint was considered by one of our investigators who thought that Advantage Finance hadn’t unfairly paid his credit broker commission for introducing his business. So he didn’t recommend that Mr Y’s complaint should be upheld. Mr Y disagreed with our investigator and the complaint was passed to an ombudsman for a final decision. My findings I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having carefully considered everything, I’ve decided not to uphold Mr Y’s complaint. I’ll explain why in a little more detail. In the joined cases of Hopcraft, Johnson & Wrench1, the Supreme Court considered how the law applies to motor finance commission related claims. Broadly speaking, the Supreme Court concluded that the relationship between a motor 1 Hopcraft and another (Respondents) v Close Brothers Limited (Appellant); Johnson (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant); Wrench (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant) [2025] UKSC 33

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finance lender and a consumer could sometimes be unfair to the consumer (Section 140 of The Consumer Credit Act 1974 (“S140 CCA”)) in circumstances where neither the credit broker nor the lender disclosed that: • there was a discretionary commission arrangement (“DCA”) – an arrangement where the commission paid was linked to the loan interest rate and the broker had the discretion to set a higher interest rate to receive more commission. • the credit broker would receive a high commission relative to the cost of credit or amount borrowed. • the credit broker was required to select the lender in preference to other lenders the broker could offer. This is sometimes referred to as a commercial tie or a right of first refusal. In this case, Advantage Finance has provided evidence to show that it paid Mr Y’s credit broker a fixed commission payment of £700 for introducing his business. The agreement was that Advantage Finance would pay Mr Y’s credit broker £700 for each customer it introduced that went on to take out a hire-purchase agreement. I know that Mr Y has said that he wasn’t told about this commission and that he referred to a number of instances of Advantage Finance breaching its obligations. In effect, Mr Y’s complaint is essentially that the undisclosed commission payment of £700 that Advantage Finance paid to his credit broker, resulted in the lending relationship between Advantage Finance and him being unfair to him under S140 CCA. While I’ve not been provided with sufficient evidence to be persuaded that the existence of commission, which in this case was £700, was disclosed to Mr Y, I nonetheless consider that it is unlikely – and certainly less likely than not – that a court would find that this commission payment rendered the lending relationship between Advantage Finance and Mr Y unfair to Mr Y under S140 CCA. And I am not persuaded that Advantage Finance failed to act fairly and reasonably in all the circumstances of this matter. I consider this to be the case because: • the commission of £700 did not involve a DCA. So the credit broker did not have discretion to set Mr Y’s interest rate. • I think it less likely than not that a court would consider the £700 commission payment to be high when compared to the amount Mr Y borrowed, or the cost of the agreement Mr Y entered into. I think it unlikely that this commission of £700 would have been a major consideration in Mr Y’s mind, had it been disclosed to him at the time of entering into the hire-purchase agreement, when the commission payment represented around 9.9% of the amount he borrowed and around 13% of the total cost of the credit. • I think it less likely than not that a court would consider that a commercial tie existed between Mr Y’s credit broker and Advantage Finance. In reaching this view, I have reviewed a range of contracts and agreements that Advantage Finance had with various brokers over several years. I have seen nothing in any of these agreements indicating that Advantage Finance had contractual ties with any of the credit brokers that it worked with. I consider this to be consistent with Advantage Finance’s position within the market as a lender serving customers that typically find it difficult to obtain credit from more mainstream lenders and have less choice as a result and the public explanation it has made about it not operating commercial ties. In this context, I’ve

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not seen anything to support an argument that a commercial tie existed between Advantage Finance and the credit broker. Overall, I’ve not been persuaded that the commission Advantage Finance paid to the credit broker that introduced Mr Y’s business means that it failed to act fairly and reasonably towards him. And I’ve not been persuaded to uphold Mr Y’s complaint. I appreciate that this will be very disappointing for Mr Y. But I hope he’ll understand the reasons for my decision and that he’ll at least feel his concerns have been listened to. My final decision My final decision is that I’m not upholding Mr Y’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr Y to accept or reject my decision before 26 May 2026. Jeshen Narayanan Ombudsman

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