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

Decision detail

Summary

Mr F complained that Moneybarn unfairly entered into a conditional sale agreement for a £9,688 car in November 2016 without conducting proportionate affordability checks and without disclosing a £600 commission paid to the credit broker. The ombudsman found that while Moneybarn's checks were not fully proportionate as they used estimated rather than actual living costs, Mr F's subsequent evidence did not demonstrate his actual expenses were significantly higher, so further checks would not have prevented the lending. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found the fixed £600 payment did not involve a discretionary arrangement, was not high relative to the loan amount (6.5-7%), and no commercial tie existed between the broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman acknowledged that Moneybarn's affordability checks were not fully proportionate as they relied on estimated rather than actual living costs, particularly given the loan amount, term length, and Mr F's previous credit difficulties. However, the ombudsman found that Mr F's subsequent evidence did not demonstrate his actual living expenses were significantly higher than Moneybarn's estimates, and that Mr F's explanations at the time of application were likely intended to persuade Moneybarn to lend rather than highlight unaffordability. Therefore, further checks would not have resulted in a different lending decision. Regarding the commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £600 fixed commission did not involve a discretionary arrangement, was not high relative to the amount borrowed (6.5-7%), and there was no evidence of a commercial tie between the broker and Moneybarn.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website