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

Decision detail

Summary

Mr S complained that Moneybarn failed to act fairly by not disclosing a £260 commission paid to the credit broker that introduced his conditional sale agreement for a £6,930 car in November 2014. Mr S argued the undisclosed commission created an unfair lending relationship under Section 140 CCA. The ombudsman applied the Supreme Court's recent judgment in Hopcraft, Johnson & Wrench and found that although the commission was not disclosed, it was unlikely a court would find the relationship unfair because the commission was fixed rather than discretionary, represented less than 4% of the loan amount, and there was no evidence of commercial ties between the broker and lender. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which identified three circumstances where motor finance relationships could be unfair: undisclosed discretionary commission arrangements, high commissions relative to credit cost, or undisclosed commercial ties. The ombudsman found none of these applied: the £260 commission was fixed (not discretionary), was proportionately low at less than 4% of the loan amount, and there was no evidence of commercial ties. The ombudsman concluded that even if disclosed, the commission would unlikely have been a major consideration for Mr S given its modest size relative to the total credit cost.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website