Advantage Finance Limited · DRN-6313134

Complaint Mr and Mrs T complain that Advantage Finance Limited (“Advantage Finance”) unfairly entered into a hire-purchase agreement with them. They’ve said the agreement was unaffordable and so they shouldn’t have been accepted for it. They’ve also said that Advantage Finance failed to disclose the commission that it paid to the credit broker that introduced their business and that this created an unfair relationship because of the impact this had on the interest they had to pay. Background In July 2017, Advantage Finance provided Mr and Mrs T with finance for a used car. The cash price of the vehicle was £11,000.00. Mr and Mrs T paid a deposit of £1,500.00 and entered into a 60-month hire-purchase agreement with Advantage Finance for the remaining £9,500.00 they required to complete their purchase. The loan had interest, fees and total charges of £8,813.00 (comprising of interest of £8,313.00, an acceptance fee of £325 and an option to purchase fee of £200), and the balance to be repaid of £18,313.20 (which does not include Mr and Mrs T’s deposit) was due to be repaid in 59 monthly instalments of £302.30 and one final payment of £477.30. Mr and Mrs T’s complaint was considered by one of our investigators. He didn’t think that Advantage Finance had done anything wrong or treated Mr and Mrs T unfairly both in relation in deciding to lend to them, or in paying commission to the credit broker. So he didn’t recommend that Mr and Mrs T’s complaint should be upheld. Mr and Mrs T 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 thought about everything I’ve been provided with, I’m not upholding Mr and Mrs T’s complaint. I’d like to explain why in a little more detail. and start by setting out my thoughts on Mr and Mrs T’s affordability complaint. Did Advantage Finance irresponsibly lend to Mr and Mrs T? We’ve explained how we handle complaints about irresponsible and unaffordable lending on our website. And I’ve used this approach to help me decide Mr and Mrs T’s complaint. Advantage Finance needed to make sure that it didn’t lend irresponsibly. In practice, what this means is that Advantage Finance needed to carry out proportionate checks to be able to understand whether Mr and Mrs T could make their payments in a sustainable manner before agreeing to lend to them. And if the checks Advantage Finance carried out weren’t sufficient, I then need to consider what reasonable and proportionate checks are likely to have shown.

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Our website sets out what we typically think about when deciding whether a lender’s checks were proportionate. Generally, we think it’s reasonable for a lender’s checks to be less thorough – in terms of how much information it gathers and what it does to verify that information – in the early stages of a lending relationship. But we might think it needed to do more if, for example, a borrower’s income was low, the amount lent was high, or the information the lender had – such as a significantly impaired credit history – suggested the lender needed to know more about a prospective borrower’s ability to repay. Advantage Finance hasn’t provided us with the output of what it was that it learnt about Mr and Mrs T or the actual data which it relied upon to determine that the payments to this agreement were affordable for them. So I don’t actually know what it was that Advantage Finance relied upon to reach the conclusion that this agreement was affordable for Mr and Mrs T. In these circumstances, I’m simply not in a position to agree that Advantage Finance has provided sufficient evidence to demonstrate that it did take reasonable steps to understand whether Mr and Mrs T could afford the monthly payments. So I’m not satisfied that it did complete fair, reasonable and proportionate affordability checks before entering into this hire-purchase agreement with Mr and Mrs T. As proportionate checks weren’t carried out before this agreement was entered into, I can’t say for sure what they would’ve shown. So I need to decide whether it is more likely than not that a proportionate check would have told Advantage Finance that it was unfair to enter into this agreement with Mr and Mrs T on the basis that they wouldn’t be able to afford the monthly payments. Given the amount borrowed, the monthly payments and the length of the agreement, in order for Advantage Finance’s checks to have been proportionate, I think that it would have had to have an understanding of Mr and Mrs T’s income, their payments to existing creditors and their regular living costs. I want to be clear in saying that this isn’t the same as saying that Advantage Finance had to obtain bank statements in order to verify all of this as how it found out about this was down to it. Having considered everything provided, I’m not persuaded that Advantage Finance obtaining this information from Mr and Mrs T would a made a difference on its decision to lend in this instance. I say this because the information Mr and Mrs T have provided about their finances at the time, on the face of things at least appears to show that when their actual committed expenditure was deducted from what they received each month, they did have the funds to sustainably make the repayments due under this agreement. I also have to consider that Mr and Mrs T’s most recent submissions are being made in support of a claim for compensation and what I need to decide here is what Mr and Mrs T are likely to have disclosed to Advantage Finance should it have posed further questions about their financial circumstances. With this in mind I think that any explanations he would have provided at the time are more likely to have been with a view to persuading Advantage Finance to lend, rather than highlighting any unaffordability. And, in these circumstances, I think it is unlikely that Mr and Mrs T would have sought to show Advantage Finance that these repayments were unaffordable in circumstances where they were paying a deposit of £1,500.00 and this supports the agreement having been affordable for them.

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So overall and having carefully considered everything, while I’ve not been persuaded that Advantage Finance’s checks before entering into this hire-purchase agreement with Mr and Mrs T went far enough, I’m satisfied that carrying out reasonable and proportionate checks won’t have prevented Advantage Finance from providing these funds, or entering into this agreement with them. In reaching my conclusions, I’ve also considered whether the lending relationship between Advantage Finance and Mr and Mrs T might have been unfair to Mr and Mrs T under section 140A of the Consumer Credit Act 1974 ( s140 CCA). However, for the reasons I’ve explained, I don’t think Advantage Finance irresponsibly lent to Mr and Mrs T or otherwise treated them unfairly in relation to this matter. And I haven’t seen anything to suggest that s140A CCA or anything else would, given the facts of this complaint, lead to a different outcome here. As this is the case, I’m therefore satisfied that Advantage Finance didn’t act unfairly towards Mr and Mrs T when it lent to them and I’m not upholding this complaint. I appreciate that this will be very disappointing for Mr and Mrs T. But I hope they’ll understand the reasons for my decision and that they’ll at least feel their concerns have been listened to. I’ll now turn to Mr and Mrs T’s complaint regarding the commission Advantage Finance paid to the credit broker that introduced them. Mr and Mrs T’s concerns regarding commission 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 finance lender and a consumer could sometimes be unfair to the consumer (under s140 CCA) in circumstances where neither the 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 broker would receive a high commission relative to the cost of credit or amount borrowed. • the broker was required to select the lender in preference to other lenders it 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 and Mrs T’s broker a total commission of £550. The agreement that Advantage Finance had with the broker that Mr and Mrs T used was that £550 would be paid for each customer introduced that went on to take out a hire-purchase agreement. I know that Mr and Mrs T have said that they weren’t told about this commission and that they have referred to a number of instances of Advantage Finance breaching its obligations. In effect, Mr and Mrs T’s complaint is essentially that the undisclosed commission payment 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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of £550 that Advantage Finance paid to their broker, resulted in the lending relationship between Advantage Finance and them being unfair to them under s140 CCA. While I’ve not been provided with sufficient evidence to be persuaded the existence of commission, which in this case was £550, was disclosed to Mr and Mrs T, I nonetheless consider it is unlikely – and certainly less likely than not – that a court would find that the commission rendered the lending relationship between Advantage Finance and Mr and Mrs T unfair to Mr and Mrs T 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 £550 did not involve a DCA. So the broker did not have discretion to set Mr and Mrs T’s interest rate. • I think it less likely than not that a court would consider the £550 commission payment to be high when compared to the amount Mr and Mrs T borrowed, or the cost of the agreement Mr and Mrs T entered into. I think it unlikely that this commission of £550 would have been a major consideration in Mr and Mrs T’s minds, had it been disclosed to them at the time of entering into the hire-purchase agreement, when the commission payment represented less than 6% of the amount they borrowed and less than 6.5% 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 and Mrs T’s 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 not seen anything to support an argument that a commercial tie existed between Advantage Finance and the credit broker. I’ve noted what Mr and Mrs T have said about not being able to easily access credit elsewhere and the cost of the credit on this agreement being high. However, Mr and Mrs T have said they didn’t have many other options, the cost of the credit was set out and I’ve not been persuaded that the agreement was unaffordable for them. In these circumstances, it’s unclear to me how or why knowing about the commission would have seen it become a major consideration in their minds, or led to them reaching a different conclusion on entering into this agreement in the way that that they now seek to argue. This is particularly bearing in mind what I’ve already said about a DCA not being involved in this case and therefore there was no clear and direct link between the commission and the interest that Mr and Mrs T agreed to pay as a result of choosing to enter into this agreement. Overall, I’ve not been persuaded that the commission Advantage Finance paid to the credit broker that introduced Mr and Mrs T’s business means that it failed to act fairly and reasonably towards them. So I’ve not been persuaded to uphold Mr and Mrs T’s commission complaint either. Having carefully considered everything, I’m satisfied that Advantage Finance didn’t act unfairly towards Mr and Mrs T when it entered into this hire-purchase agreement with them. And I’m not upholding this complaint. I appreciate that this will be very disappointing for

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Mr and Mrs T. But I hope they’ll understand the reasons for my decision and that they’ll at least feel their concerns have been listened to. My final decision My final decision is that I’m not upholding Mr and Mrs T’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs T to accept or reject my decision before 26 May 2026. Jeshen Narayanan Ombudsman

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