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

Decision detail

Summary

Mr D complained that Moneybarn failed to act fairly by not disclosing a £550 commission paid to the credit broker that introduced his conditional sale agreement for a £15,450 car loan in August 2018. Mr D 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 framework from Hopcraft, Johnson & Wrench and found the complaint not upheld because the commission was fixed (not discretionary), represented only 3.5% of the borrowed amount, and no commercial tie existed between the broker and lender. The ombudsman concluded that disclosure of such a modest commission would not have materially affected Mr D's decision to enter the agreement.

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 circumstances applied: the £550 was a fixed commission (not discretionary), represented only 3.5% of the borrowed amount and less than 7% of total credit cost (not high), and no commercial tie existed between the broker and Moneybarn based on review of multiple broker agreements and the lender's market position and public statements.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website