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

Decision detail

Summary

Mr F complained that Moneybarn failed to disclose a £1,266.00 commission paid to the credit broker that introduced his motor finance business, arguing this created an unfair lending relationship. In April 2022, Mr F entered into a conditional sale agreement with Moneybarn for a £10,550.00 car with an 18.2% APR, with total repayment of £15,582.49 over 60 months. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that while the commission was undisclosed, it was unlikely a court would find the relationship unfair because the commission was fixed (not discretionary), was not high relative to the amount borrowed, and there was no commercial tie 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, 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 commission was fixed (not discretionary), was not high at 12% of the amount borrowed and 25% of total credit cost, and there was no evidence of a commercial tie. Therefore, even though the commission was undisclosed, it was unlikely a court would find the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website