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

Decision detail

Summary

Mrs N complained that Moneybarn failed to act fairly by not disclosing a £775 commission paid to the motor dealer who introduced her conditional sale agreement for a £9,900 car loan. She argued the undisclosed commission unfairly increased her interest charges. The ombudsman applied the Supreme Court's Hopcraft judgment on motor finance commission and found that although the commission was undisclosed, it did not render the lending relationship unfair because it was a fixed payment (not discretionary), represented less than 4.5% of the borrowed amount, and no commercial tie existed between Moneybarn and the dealer. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's Hopcraft test, which requires three elements for unfairness: a discretionary commission arrangement, high commission relative to credit cost, and a commercial tie. The ombudsman found none of these elements were present. The £775 commission was fixed (not discretionary), represented less than 4.5% of the borrowed amount, and no commercial tie existed between Moneybarn and the motor dealer. Therefore, even though undisclosed, the commission was unlikely to render the relationship unfair under Section 140 CCA.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website