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

Decision detail

Summary

Ms G complained that Moneybarn failed to act fairly by not disclosing a £260 commission paid to the motor dealer who introduced her to the lender for a £5,990 conditional sale agreement in April 2015. She argued the undisclosed commission created an unfair lending relationship under Section 140 CCA. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that although the commission was not disclosed, it was unlikely a court would find the relationship unfair because the commission was fixed (not discretionary), represented only 4.5% of the loan amount, and no commercial tie existed between Moneybarn and the motor dealer. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which identifies three circumstances where non-disclosure of commission could render a lending relationship unfair: discretionary commission arrangements, high commission relative to credit cost, and commercial ties. The ombudsman found none of these three factors were present. The £260 commission represented less than 4.5% of the amount borrowed and approximately 5% of total credit cost, was not subject to a DCA, and no commercial tie existed between Moneybarn and the motor dealer. Therefore, even if undisclosed, the commission was unlikely to be found unfair by a court.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website