Not upheld: undisclosed commission and alleged unfair relationship under Section 140 Consumer Credit Act 1974 complaint against Secure Trust Bank Public Limited Company (trading as Moneyway)

Decision detail

Summary

Mr B complained that Moneyway failed to disclose a £1,121.33 commission paid to the credit broker that introduced his hire-purchase agreement for a used car, arguing this created an unfair relationship. The ombudsman applied the Supreme Court's recent judgment in Hopcraft, Johnson & Wrench, which sets out the circumstances where undisclosed commission can render a lending relationship unfair. Finding that the commission was fixed rather than discretionary, represented less than 10% of the loan amount, and that no commercial tie existed between the broker and lender, the ombudsman concluded it was unlikely a court would find the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which established that an unfair relationship under Section 140 CCA could arise from undisclosed commission only in specific circumstances: a discretionary commission arrangement, high commission relative to borrowing, or a commercial tie. The ombudsman found none of these factors were present. The fixed commission of £1,121.33 represented less than 10% of the amount borrowed and less than 20% of the total cost of credit, making it unlikely a court would consider it high. No discretionary element existed, and no commercial ties were found in Moneyway's broker agreements.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website