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

Decision detail

Summary

Mr J complained that Moneybarn failed to act fairly by not disclosing a £350 commission paid to the credit broker that introduced his business for a conditional sale agreement on a £6,590 car loan in July 2014. Mr J argued the undisclosed commission created an unfair relationship under Section 140 CCA. The ombudsman applied the Supreme Court's Hopcraft framework and found the complaint not upheld because the commission was fixed rather than discretionary, represented only 5.3% of the borrowed amount, and there was no evidence of a commercial tie between the broker and lender. The ombudsman concluded that even if disclosed, the commission would not have been a major consideration for Mr J.

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 here. The £350 fixed commission was not discretionary, was proportionate at 5.3% of the borrowed amount, and there was no evidence of commercial ties. Therefore, even though undisclosed, the commission was unlikely to render the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website