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

Decision detail

Summary

Mr W complained that Moneybarn unfairly entered into a conditional sale agreement for a £10,048 car loan in January 2019, arguing that proportionate affordability checks were not carried out and that an undisclosed £775 commission paid to his credit broker created an unfair relationship. The ombudsman found that while Moneybarn's checks were not fully proportionate, using Mr W's actual living expenses would likely have led to the same lending decision as he had sufficient funds to repay. Regarding the commission, the ombudsman applied the Supreme Court's Hopcraft test and concluded that the fixed £775 commission (less than 8% of the amount borrowed) did not involve a discretionary arrangement, was not high relative to the credit cost, and no commercial tie existed between the broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

Although Moneybarn's affordability checks were not fully proportionate, the ombudsman concluded that conducting proper checks using Mr W's actual living expenses would likely have led to the same lending decision, as he appeared to have sufficient funds to make the repayments. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found that the £775 fixed commission (representing less than 8% of the amount borrowed) did not involve a discretionary commission arrangement, was not high relative to the credit cost, 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