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

Decision detail

Summary

Mr W complained that Moneybarn failed to act fairly by not disclosing a £500 commission paid to the credit broker that introduced his business for a conditional sale agreement on a £19,500 car purchase in September 2015. He argued the undisclosed commission created an unfair lending relationship under Section 140 CCA. The ombudsman applied the Supreme Court's test from Hopcraft v Close Brothers and found that while the commission may not have been disclosed, it was unlikely to render the relationship unfair because it was a fixed payment (not discretionary), represented only 2.5% of the borrowed amount, and no commercial tie existed between broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft v Close Brothers, which identifies three circumstances where undisclosed commission might render a lending relationship unfair: discretionary commission arrangements, high commission relative to borrowing, and commercial ties. The ombudsman found none of these applied: the £500 was fixed (not discretionary), represented only 2.5% of the borrowed amount (not high), and no commercial tie existed between broker and lender. 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