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

Decision detail

Summary

Miss G and Mr M complained that Moneybarn failed to act fairly by not disclosing a £450 broker commission paid when they entered into a Conditional Sale agreement for a used car in August 2016. They argued the undisclosed commission created an unfair lending relationship under Section 140 CCA. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that although the commission was not disclosed, it was unlikely to render the relationship unfair because: (1) it was not a discretionary commission arrangement, (2) at 5.8-6.1% of the credit cost it was not high, and (3) no commercial ties existed between the broker and Moneybarn. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which identified three circumstances where undisclosed commission could render a lending relationship unfair: discretionary commission arrangements, high commission relative to credit cost, and commercial ties. The ombudsman found none of these three factors were present. The £450 commission represented only 5.8% of the amount borrowed and 6.1% of the total credit cost, which was not high. No discretionary commission arrangement existed, meaning the broker had no discretion to set the interest rate. No commercial ties were found in any of Moneybarn's broker agreements. Therefore, even though the commission was not disclosed, it was unlikely a court would find the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website