Not upheld: undisclosed commission in motor finance / unfair relationship under Section 140 Consumer Credit Act 1974 complaint against Secure Trust Bank Public Limited Company (trading as Moneyway)

Decision detail

Summary

Mr W complained that Moneyway failed to disclose a £150 commission paid to the credit broker that introduced his hire-purchase agreement for a £6,380 car, arguing this created an unfair lending relationship. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which identifies three circumstances where undisclosed commission might render a relationship unfair: discretionary commission arrangements, high commission relative to loan amount, and exclusive commercial ties. Finding none of these three factors present—the commission was fixed, modest at 2.5-3% of the loan value, and no exclusive broker arrangement existed—the ombudsman concluded it was unlikely a court would find the relationship unfair and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's three-part test from Hopcraft, Johnson & Wrench to determine whether an undisclosed commission rendered the lending relationship unfair. The ombudsman found that: (1) the commission was fixed, not discretionary, so the broker had no discretion to set the interest rate; (2) the £150 commission was modest at 2.5-3% of the loan value and unlikely to be a major consideration had it been disclosed; and (3) no commercial tie or right of first refusal existed between the broker and Moneyway. Therefore, 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