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

Decision detail

Summary

Mr C complained that Moneybarn failed to act fairly by not disclosing a £700 commission paid to the credit broker that introduced his business for a conditional sale agreement on a £9,150 car loan in April 2016. Mr C 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 while the commission may not have been disclosed, it was unlikely to render the relationship unfair because it was a fixed payment (not discretionary), represented less than 8% of the borrowed amount, and no commercial tie existed between the broker and lender. 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 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 applied: the £700 commission was fixed (not discretionary), represented less than 8% of the borrowed amount, and no commercial tie existed. The ombudsman concluded that even if undisclosed, the commission was unlikely to have been a major consideration for Mr C or changed his decision to enter the agreement.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website