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

Decision detail

Summary

Mr D complained that Moneybarn unfairly entered into a conditional sale agreement for a £7,905 car in February 2018 without conducting proportionate affordability checks and without disclosing a £750 commission paid to the credit broker. The ombudsman found that while Moneybarn's checks were not fully proportionate given Mr D's history of defaults and CCJs, Mr D provided no clear evidence that actual living expenses were higher than estimated, making it unlikely that more thorough checks would have prevented the lending. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and concluded the fixed £750 payment (less than 9.5% of the loan amount) with no discretionary element and no evidence of a commercial tie was unlikely to render the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman acknowledged that Moneybarn's affordability checks were not fully proportionate given Mr D's poor credit history, but found that Mr D failed to provide clear evidence that his actual living expenses were significantly higher than Moneybarn's estimates. The ombudsman reasoned that Mr D would have been motivated to downplay his expenses at the time of sale to obtain the car, making his later claims unreliable. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found the £750 payment was not a DCA, represented less than 9.5% of the amount borrowed, 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