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

Decision detail

Summary

Mr C complained that Moneybarn failed to act fairly by not disclosing a £200 commission paid to the credit broker that introduced his business for a conditional sale agreement on a £4,300 car loan in February 2016. Mr C argued the undisclosed commission created an unfair 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 the fixed £200 commission (representing less than 5% of the borrowed amount) did not involve a discretionary arrangement, was not high relative to the credit cost, and no commercial tie existed between the broker and lender. The ombudsman concluded it was unlikely a court would find the relationship unfair and therefore 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 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 £200 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 if undisclosed, the commission was unlikely to render the relationship unfair under Section 140 CCA.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website