Not upheld: unfair credit relationship under section 140A of the CCA; section 75 CCA claim (misrepresentation and breach of contract); alleged breach of Timeshare Regulations 2010 regulation 14(3); undisclosed commission complaint against Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance (formerly Hitachi)

Decision detail

Summary

Mrs L complained that Mitsubishi HC Capital UK PLC (trading as Novuna Personal Finance) acted unfairly by being party to an unfair credit relationship and by rejecting her section 75 CCA claim. Mrs L had financed the purchase of Fractional Club timeshare membership (£10,780) with a £14,174 loan in September 2017. She alleged the Supplier misrepresented the product as an investment, breached contract regarding holiday availability, and that the Lender failed to conduct proper affordability checks and failed to disclose commission arrangements. An FOS investigator upheld the complaint on the basis that the timeshare was marketed as an investment in breach of regulation 14(3) of the Timeshare Regulations 2010. However, the ombudsman found no actionable misrepresentation or breach of contract, and concluded that even if the Supplier had breached regulation 14(3), this would not have rendered the credit relationship unfair because Mrs L's evidence regarding her motivation to purchase was unreliable and did not demonstrate that the prospect of financial gain materially influenced her decision. The ombudsman also found the commission arrangements (4% of amount borrowed) were not disproportionate and did not create unfairness. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A of the CCA, finding that regulatory breaches do not automatically create unfairness. While accepting it was possible the Supplier breached regulation 14(3) by marketing the timeshare as an investment, the ombudsman found this was not determinative. The key issue was whether such a breach materially influenced Mrs L's decision to purchase. The ombudsman found Mrs L's evidence unreliable because: (1) significant portions were written in a template by the professional representative rather than by Mrs L herself; (2) the evidence written in Mrs L's own words (Additional Information) did not mention profit, contradicting the template's claims; (3) there were factual errors in their account; and (4) they appeared motivated by better holidays rather than financial gain. The ombudsman concluded that even if a breach occurred, Mrs L would have proceeded with the purchase regardless. Regarding commission, the ombudsman found the 4% commission was not high enough to render the relationship unfair, particularly given Mrs L's lack of alternative means to finance the purchase and the absence of a fiduciary duty owed by the Supplier when acting as credit broker.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website