Not upheld: undisclosed commission / unfair relationship complaint against Moneybarn No.1 Limited

Decision detail

Summary

Mr S complained that Moneybarn acted unfairly by failing to disclose a £600 commission paid to his broker when he entered into a conditional sale agreement for a car in January 2019, resulting in an APR of approximately 40%. Moneybarn rejected the complaint, and the FOS investigator also did not recommend upholding it. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that although the commission was undisclosed, it did not create an unfair relationship because the commission was not discretionary, represented only 4% of the amount borrowed and cost of credit, and no commercial tie existed between the broker and lender. The complaint was not upheld and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench, which established that an unfair relationship could arise from undisclosed commission only in specific circumstances: where there was a discretionary commission arrangement, where the commission was high relative to the amount borrowed or cost of credit, or where a commercial tie existed. The ombudsman found none of these factors were present. The £600 commission represented only 4% of the amount borrowed and 4% of the total cost of credit, was not discretionary, and no commercial tie existed between Moneybarn and the broker. The ombudsman concluded that knowledge of the commission would not have been a key factor in Mr S's decision to enter the agreement, particularly as he was aware of the interest rate and monthly repayments when he signed.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website