Not upheld: non-disclosure of commission and potential unfair relationship complaint against FCE Bank Plc (Ford Credit)

Decision detail

Summary

Mrs N complained that Ford Credit failed to disclose a £205.35 commission it paid to the motor dealer who introduced her hire purchase agreement for a car costing £11,734.54. She argued this non-disclosure prevented her from making a fully informed choice and potentially breached consumer credit regulations. The ombudsman acknowledged that undisclosed commissions can create unfair lending relationships under Section 140A of the Consumer Credit Act 1974, but found that in this case, the commission was unlikely to have influenced Mrs N's decision given the exceptionally low interest rate (0.9% APR) and minimal total credit cost (£205.70). The ombudsman concluded that Mrs N would more likely than not have entered into the agreement even with full disclosure, as alternative credit would likely have cost more, and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman acknowledged that under Section 140A of the Consumer Credit Act 1974 (as established in Johnson), an undisclosed commission could potentially result in an unfair lending relationship. However, the ombudsman found that whether an undisclosed commission actually results in an unfair relationship depends on multiple factors. In this case, the commission of £205.35 was a low amount relative to the very low cost of credit (0.9% APR, £205.70 total charge), making it unlikely to have been a major consideration for Mrs N. The ombudsman concluded that Mrs N would more likely than not have entered into the agreement even with full disclosure, as alternative credit elsewhere would likely have cost more.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website