Not upheld: undisclosed commission in motor finance - unfair relationship claim complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mr R complained that Moneybarn failed to act fairly by not disclosing a £330 commission paid to the credit broker that introduced his conditional sale agreement for a car purchase in September 2013. Mr R 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 framework from Hopcraft, Johnson & Wrench and found that although the commission was undisclosed, it was unlikely a court would find the relationship unfair because the commission was fixed rather than discretionary, represented less than 5% of the borrowed amount, and no commercial tie existed between the broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's framework from Hopcraft, Johnson & Wrench, which identified three circumstances where non-disclosure of commission could render a lending relationship unfair: discretionary commission arrangements, high commission relative to borrowing, and commercial ties. The ombudsman found none of these circumstances applied: the £330 commission was fixed (not discretionary), represented less than 5% of the borrowed amount, 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