Not upheld: Motor finance commission (DCA) complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mr M complained that Moneybarn failed to act fairly by not disclosing a £650 commission paid to his credit broker and by lending to him without conducting adequate affordability checks. The ombudsman examined both complaints against the Supreme Court's Hopcraft, Johnson & Wrench framework for motor finance commission cases. While the commission was undisclosed, the ombudsman found it was a fixed payment (not discretionary), represented less than 8% of the amount borrowed, and there was no evidence of a commercial tie between broker and lender. Regarding affordability, although Moneybarn's documented checks were insufficient, analysis of Mr M's bank statements showed he had substantial monthly surplus income after essential expenditure, suggesting proportionate checks would not have revealed affordability concerns. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's decision in Hopcraft, Johnson & Wrench, which sets out when motor finance relationships may be unfair due to undisclosed commission. The ombudsman found that the £650 fixed commission did not involve a discretionary commission arrangement, was not high relative to the amount borrowed (less than 8% of amount borrowed, 9.3% of total credit cost), and there was no evidence of a commercial tie between the broker and Moneybarn. Regarding affordability, while Moneybarn's documented checks were insufficient, the ombudsman examined Mr M's bank statements and found he had substantial monthly surplus income after essential expenditure, suggesting proportionate checks would not have revealed affordability concerns.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website