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

Decision detail

Summary

Mr E complained that Moneybarn failed to act fairly by not disclosing a £600 commission paid to the credit broker that introduced his conditional sale agreement for a £9,999 car in September 2018. Mr E 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 Hopcraft test and found the complaint not upheld because the commission was fixed (not discretionary), represented only 6-7% of the transaction value (not high), and no commercial tie existed between Moneybarn and the broker. The ombudsman concluded it was unlikely a court would find the relationship unfair and that disclosure would not have materially influenced Mr E's decision.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's Hopcraft test, which identifies three circumstances where an undisclosed commission might render a lending relationship unfair: a discretionary commission arrangement, a high commission relative to borrowing, or a commercial tie. The ombudsman found none of these applied: the £600 was a fixed commission (not discretionary), represented only 6-7% of the transaction value (not high), and no commercial tie existed between Moneybarn and the broker. Therefore, the ombudsman concluded it was unlikely a court would find the relationship unfair under Section 140 CCA.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website