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

Decision detail

Summary

Mr O complained that Moneybarn failed to disclose a £800 commission paid to the credit broker that introduced his business, arguing this created an unfair lending relationship. In December 2022, Moneybarn provided motor finance for a used car with a purchase price of £9,995.00, with Mr O borrowing £7,995.00 at 29.9% APR over 54 months, resulting in total charges of £5,636.60. The ombudsman applied the Supreme Court's test from Hopcraft, Johnson & Wrench and found that although the commission was undisclosed, it was unlikely a court would find the relationship unfair because the commission was fixed (not discretionary), represented only 10-14% of the loan amount (not high), 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 amount borrowed, or where a commercial tie existed. In this case, none of these factors were present. The £800 fixed commission represented approximately 10% of the amount borrowed and 14% of the total cost of credit, which was not considered high. There was no discretionary element allowing the broker to set the interest rate, and no evidence of a commercial tie. Mr O knew the APR when he signed the agreement and accepted those terms without question.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website