Advantage Finance Limited · DRN-6226330

The complaint Mr J complains about a motor finance agreement he entered into with Advantage Finance Limited (‘Advantage’). He says that Advantage failed to disclose that it paid commission to the broker that introduced his business and that this resulted in him being charged more interest. And he says Advantage unfairly applied fees and charges when he missed payments and the agreement was terminated. Mr J is bringing this complaint through a third-party representative. However, for ease of reading I’ll refer to Mr J alone in this decision. What happened In October 2016 Mr J applied for finance to acquire a used car. The cash price of the car was £7,099 and Mr J entered into a hire purchase agreement with Advantage to finance the full amount. After interest and charges the total amount due was £12,568.60, repayable in 59 monthly instalments of £206.56 and a final payment of £381.56. In April 2024 Mr J contacted Advantage to complain about an undisclosed commission payment and what he said were excessive charges in relation to the agreement. Advantage didn’t uphold Mr J’s complaint. In summary, it said the documents Mr J was provided with disclosed that commission might be paid. It added it paid a small, fixed sum of commission to the broker who introduced Mr J to it. Advantage didn’t comment on the fees and charges it applied to Mr J’s account. Mr J referred his complaint to our service, where one of our investigators looked into what had happened. He concluded that Advantage hadn’t treated Mr J unfairly or acted unreasonably when it entered into the hire purchase agreement with him. Mr J didn’t agree and asked for an ombudsman’s decision – and so the complaint has come to me. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I realise my decision will likely come as disappointing news, but having carefully considered everything, I have decided not to uphold Mr J’s complaint. I’ll explain why. Mr J’s representative said he was vulnerable and couldn’t easily obtain credit elsewhere. They referred to breaches of regulation and the lending relationship between Advantage and Mr J being unfair under S140 of the Consumer Credit Act 1974 (S140 CCA). I note Mr J’s representatives said the investigator hadn’t considered Mr J’s complaint about Advantage’s lending decision. However, looking at Mr J’s letter of complaint, I can’t see that he’s raised this with Advantage previously. And so, under the rules governing our service, I’m unable to comment on the lending decision as part of this decision. If Mr J would like the lending decision to be investigated, he’ll need to raise this with Advantage in the first instance.

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Turning to the commission element of Mr J’s complaint. In the joined cases of Hopcraft, Johnson & Wrench1, the Supreme Court considered how the law applies to claims relating to motor finance commission. 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 car dealer 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 car dealer would receive a high commission relative to the cost of credit or amount borrowed. • the car dealer was required to select the lender in preference to other lenders the car dealer could offer. This is sometimes referred to as a commercial tie or a right of first refusal. In Mr J’s case Advantage has provided evidence to show that it paid the finance broker a commission of £375 for introducing his business – this being a flat rate. Mr J’s complaint is effectively that the undisclosed commission payment of £375 that Advantage paid to his broker resulted in the lending relationship between Advantage and him being unfair to him under S140 CCA. I’ve not been persuaded that the existence of commission (in this case £375), was disclosed to Mr J. That said, I consider it more likely than not that a court would not find that the lending relationship between Advantage and Mr J was unfair to Mr J under S140 CCA. I think it is likely – and certainly more likely than not – that a court would not find any failure to disclose the £375 commission payment to Mr J means that the lending relationship between Advantage and Mr J was unfair to Mr J. And I’m not persuaded that Advantage failed to act fairly and reasonably in all the circumstances of this complaint. This is because: • the commission of £375 did not involve a DCA. So, the broker didn’t have discretion to set Mr J’s interest rate. • I think it more likely than not that a court would not consider the £375 commission payment to be high when compared to the amount Mr J borrowed, or the cost of the agreement Mr J entered into. • l don’t think it’s likely that the commission of £375 would have been a major consideration in Mr J’s mind, had it been disclosed to him at the time of entering into the hire purchase agreement, when the commission payment represented less than 5.3% of the amount he borrowed and only 6.86% of the total cost of the credit. • I think it’s more likely than not that a court would not consider that a commercial tie existed between Mr J’s broker and Advantage. In reaching this view, I have reviewed a range of contracts and agreements that Advantage had with various brokers over several years. I’ve seen nothing in any of these agreements indicating that Advantage had contractual ties with any of the motor dealers and brokers that it worked with. I consider this to be consistent with Advantage’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. In this context, I’ve not 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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seen anything to support an argument that a commercial tie existed between Advantage and the finance broker. I’ve noted what Mr J has said having limited options for sourcing credit and the overall cost of the credit on this agreement being high. He said he needed a car for his commute to work. So, it’s unclear to me how knowing about the commission would have impacted his decision to take out the finance with Advantage, given he needed a car, knew the cost of the agreement and, by his own admission, had limited means of acquiring one. Given that Advantage paid a fixed amount of commission and it wasn’t a DCA model, so there was no direct connection between the commission payment and the interest rate Mr J received, I’m satisfied that if Mr J had been aware of the commission arrangement between Advantage and his broker it wouldn’t have impacted his decision to take out the credit agreement. And for that reason, I’m not upholding this part of Mr J’s complaint. Mr J has also complained about the fees and charges Advantage applied to his agreement when the agreement defaulted. He said the charges were excessive and beyond the reasonable costs Advantage incurred. Based on what I’ve seen Mr J’s direct debit failed on or around 1 May 2019. Advantage wrote to Mr J to advise him of this. It said if the account fell into arrears it would apply charges in line with the agreement’s terms. Looking at Mr J’s account statements, I can see Advantage applied two arrears management fees and one unpaid direct debit fee of £12 respectively in May and June 2019. However, I can also see Advantage reversed the fees in July 2019, so in effect Mr J hasn’t had to pay those fees – so he hasn’t lost out financially. While I understand that Mr J feels the charges are excessive, the evidence I’ve seen shows Mr J was informed of the charges before he entered into the agreement and at the time they were applied. The amount of the charges is in line with industry norm, so I’m not persuaded they were excessive. Given this, I find Mr J was made aware of the charges and so I’m satisfied Advantage didn’t apply them unfairly. For completeness, I can see Mr J paid £25 at the end of the agreement, and this wasn’t refunded. Looking at the account statement, this £25 payment appears to relate to damages on the car following the voluntary termination of the agreement. Mr J hasn’t complained about this, so I’m not going to comment on this further. In summary, while I recognise that Mr J will be disappointed with my decision, I haven’t seen anything that leads me to conclude that Advantage treated Mr J unfairly in relation to the commission arrangement or the charges and fees it applied. For that reason, I’ve decided not to uphold his complaint. My final decision For the reasons I’ve explained, I’m not upholding Mr J’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr J to accept or reject my decision before 20 April 2026. Anja Gill Ombudsman

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