Not upheld: irresponsible lending and undisclosed broker commission complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mr R complained that Moneybarn unfairly entered into a conditional sale agreement for £8,860 in July 2018 without conducting proportionate affordability checks and without disclosing a £575 commission paid to the credit broker. The ombudsman found that while Moneybarn's checks were deficient in relying on estimated living costs, further investigation would not have changed the lending decision as Mr R's verified income and actual expenses did not suggest unaffordability. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and concluded the £575 payment was unlikely to render the relationship unfair as it was not discretionary, was proportionate to the loan amount (less than 6.5% of borrowing), and no commercial tie existed between the broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

While Moneybarn failed to obtain actual living costs and its checks were not fully proportionate, the ombudsman found that obtaining further information would not have resulted in a different lending decision, as Mr R's actual living expenses were not significantly higher than estimates and he had provided payslips supporting his declared income. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £575 payment unlikely to render the relationship unfair because: (1) it was not a discretionary commission arrangement; (2) at less than 6.5% of the amount borrowed and 7% of total credit cost, it was not high; and (3) no commercial tie existed between the broker and Moneybarn.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website