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

Decision detail

Summary

Mr B complained that Moneybarn failed to act fairly by not disclosing a £800 fixed commission paid to the credit broker that introduced his conditional sale agreement for an £8,799 car in August 2019, arguing this created an unfair relationship. The ombudsman applied the Supreme Court's Hopcraft, Johnson & Wrench decision and found that the undisclosed commission did not render the relationship unfair because it was a fixed payment (not discretionary), represented less than 9.1% of the borrowed amount, and no commercial tie existed between broker and lender. The ombudsman concluded that disclosure would unlikely have materially affected Mr B's decision given his limited financing options and his acceptance of the 37.9% APR, and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's decision in Hopcraft, Johnson & Wrench, which established that an unfair relationship under Section 140 CCA could arise where a discretionary commission arrangement existed, the commission was high relative to the credit cost, or a commercial tie existed between broker and lender. The ombudsman found none of these factors were present: the commission was fixed (not discretionary), the £800 payment was not high relative to the £8,799 borrowed or £8,946.43 interest charged, and no commercial tie existed. The ombudsman also noted that Mr B knew the APR when signing and had limited alternatives for car finance, so disclosure of the commission would unlikely have materially affected his decision.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website