Not upheld: Motor finance commission (DCA) complaint against Secure Trust Bank Public Limited Company (trading as Moneyway)

Decision detail

Summary

Miss U complained that Moneyway failed to disclose a £900 commission paid to the credit broker who introduced her hire purchase agreement for a used car, arguing this created an unfair relationship. The ombudsman applied the Supreme Court's recent guidance in Hopcraft, Johnson & Wrench, which sets out three conditions for undisclosed commission to render a lending relationship unfair. Finding that none of these conditions were met—the commission was fixed rather than discretionary, was not high relative to the loan amount, and no commercial tie existed—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 three-part test from Hopcraft, Johnson & Wrench to determine whether undisclosed commission rendered the relationship unfair. The ombudsman found: (1) the commission was fixed, not discretionary, so the broker had no ability to set Miss U's interest rate; (2) the £900 commission (10.5% of amount borrowed, 20% of total credit cost) was unlikely to be considered high by a court and would not have been a major consideration had it been disclosed; and (3) no commercial tie existed between the broker and Moneyway based on review of multiple broker agreements. Therefore, even though the commission was undisclosed, it was unlikely a court would find the relationship unfair under Section 140 CCA.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website