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

Decision detail

Summary

Miss S complained that Moneybarn failed to act fairly by not disclosing a £408.50 commission paid to the motor dealer who introduced her business, arguing this created an unfair lending relationship. Miss S financed a £7,093.06 car purchase through a 60-month conditional sale agreement with interest charges of £7,231.55. The ombudsman applied the Supreme Court's Hopcraft framework and found that while the commission was likely undisclosed, it was unlikely to render the relationship unfair because: the commission did not involve a discretionary arrangement (so the dealer had no control over her interest rate), the £408.50 represented less than 6% of the credit cost, 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 framework from Hopcraft, Johnson & Wrench, which established that undisclosed commission could render a lending relationship unfair only in specific circumstances: where a discretionary commission arrangement existed, the commission was high relative to the credit cost, or a commercial tie existed. The ombudsman found none of these factors applied. The £408.50 commission represented less than 6% of the amount borrowed and total credit cost, no DCA existed (so the motor dealer had no discretion over Miss S's interest rate), and no contractual commercial tie was evident from Moneybarn's agreements with brokers. Therefore, even if undisclosed, the commission was unlikely to have materially influenced Miss S's decision or rendered the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website