Not upheld: irresponsible lending and undisclosed commission complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mr R complained that Moneybarn unfairly entered into a conditional sale agreement for a used car in December 2016, claiming insufficient affordability checks and unaffordable finance, and that an undisclosed £450 commission to the credit broker created an unfair relationship. Moneybarn verified Mr R's income via payslips and conducted credit searches showing a previous default, but relied on estimated rather than actual living costs. The ombudsman found the checks were not fully proportionate but concluded that further checks would not have changed the lending decision, particularly given Mr R's successful early settlement of the loan. On the commission issue, the ombudsman applied the Supreme Court's Hopcraft test and found the undisclosed £450 commission (less than 3.5% of the loan 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, therefore the relationship was not unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while Moneybarn failed to obtain actual living costs and therefore its checks were not fully proportionate, Mr R's bare assertion that payments were unaffordable was uncorroborated. Critically, Mr R successfully settled the loan a year early and retained the vehicle, undermining claims of unaffordability. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's Hopcraft test and found: (1) no discretionary commission arrangement existed, so the broker had no discretion over interest rates; (2) the £450 commission (less than 3.5% of amount borrowed and 4% of total credit cost) was unlikely to be considered high; and (3) 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