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

Decision detail

Summary

Miss I complained that Moneybarn failed to act fairly by not disclosing a £330 broker commission paid when she entered into a Conditional Sale agreement for a £9,100 car loan in July 2015. She argued the undisclosed commission created an unfair lending relationship under Section 140 of the Consumer Credit Act 1974. The ombudsman applied the Supreme Court's recent Hopcraft judgment framework, which identifies three circumstances where undisclosed commission could be unfair: discretionary commission arrangements, high commission relative to credit cost, and commercial ties. Finding none of these factors present—the commission was fixed, represented only 3.6% of the borrowed amount, and no commercial tie existed—the ombudsman concluded it was unlikely a court would find the relationship unfair and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's framework from Hopcraft, Johnson & Wrench, which identified three circumstances where undisclosed 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 applied: the £330 commission was fixed (not discretionary), represented only 3.6% of the amount borrowed and 3.3% of total credit cost (not high), and no commercial tie existed between Moneybarn and the broker. Therefore, even though the commission was undisclosed, it was unlikely a court would find the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website