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

Decision detail

Summary

Mr B and Miss W complained that Moneybarn irresponsibly lent to them for a used car conditional sale agreement in October 2018 and failed to disclose a £450 broker commission. The ombudsman found Moneybarn's affordability checks were insufficient given the borrowers' credit history of recent defaults, but concluded that proportionate checks would have shown the £188.24 monthly payments were sustainable given their joint income and committed expenses. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found the fixed £450 commission (8% of borrowing and credit cost) did not involve discretionary pricing, was not disproportionately high, and no commercial tie existed between broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

Although Moneybarn's affordability checks were insufficient given the credit history, the ombudsman applied a counterfactual test and concluded that reasonable checks would have shown the payments were sustainable based on the borrowers' joint income, committed expenses, and existing credit commitments at the time of lending. Regarding commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £450 fixed commission (8% of amount borrowed and cost of credit) did not involve discretionary commission, was not high relative to the borrowing, and no commercial tie existed between broker and lender, therefore the relationship was not unfair under section 140A CCA.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website