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

Decision detail

Summary

Mr S complained that Moneybarn failed to disclose a £600 commission paid to the credit broker that introduced his business for a conditional sale agreement on a used car purchased in June 2016 for £6,499.00, arguing this created an unfair lending relationship. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that while the commission was not disclosed, it was unlikely a court would find the relationship unfair because the commission was fixed (not discretionary), represented only 9% of the amount borrowed and cost of credit, 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 established that undisclosed commission could render a lending relationship unfair only in specific circumstances: where there was a discretionary commission arrangement (DCA), where the commission was high relative to the cost of credit, or where a commercial tie existed. In this case, none of these factors were present. The £600 fixed commission represented only 9% of the amount borrowed and 9% of the total cost of credit, which was not considered high. The absence of a DCA meant there was no direct link between the commission and the interest rate Mr S paid. No evidence of a commercial tie was found. Therefore, it was unlikely a court would find the relationship unfair under Section 140 CCA.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website