Not upheld: undisclosed commission and unfair relationship under Section 140 Consumer Credit Act 1974 complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mr M complained that Moneybarn failed to act fairly by not disclosing a £500 commission paid to the credit broker that introduced his conditional sale agreement for a £13,480 car purchase in May 2017. The ombudsman applied the Supreme Court's recent Hopcraft judgment, which identified three circumstances that could make motor finance relationships unfair: discretionary commissions, high commissions relative to borrowing, and commercial ties. Finding that none of these applied—the commission was fixed, represented only 3.7% of the borrowed amount, and no commercial tie existed—the ombudsman concluded it was unlikely a court would find the relationship unfair under Section 140 of the Consumer Credit Act 1974. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's framework from Hopcraft, Johnson & Wrench, which identified three circumstances that could render a motor finance relationship unfair: undisclosed discretionary commission arrangements, high commission relative to borrowing, and commercial ties. The ombudsman found that none of these circumstances applied here: the commission was fixed (not discretionary), the £500 payment represented only 3.7% of the borrowed amount and less than 5% of total credit cost (not high), and no commercial tie existed between the broker and Moneybarn. Therefore, even though the commission was undisclosed, it was unlikely a court would find the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website