Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; rejection of section 75 claim for misrepresentation and breach of contract; alleged breach of fiduciary duty under section 56 of the CCA; alleged breach of regulation 14(3) of the Timeshare Regulations 2010; alleged irresponsible lending; alleged undisclosed commission complaint against Mitsubishi HC Capital UK PLC, trading as Novuna Personal Finance

Decision detail

Summary

Mr M and Mrs M purchased Fractional Club timeshare membership in March 2013 for £9,982 (after trade-in), financed by a £25,752 loan from the Lender. The membership included a share in an allocated property's net sale proceeds. Mr M's membership was suspended in 2014 for non-payment of annual maintenance fees. In July 2019, Mr M raised a complaint alleging the Lender acted unfairly by: (1) rejecting a section 75 claim for misrepresentation and breach of contract by the Supplier; (2) participating in an unfair credit relationship under section 140A of the CCA due to inadequate affordability checks, pressure from the Supplier, breach of regulation 14(3) of the Timeshare Regulations (prohibition on marketing timeshares as investments), unfair contract terms, and undisclosed commission; and (3) being liable under section 56 of the CCA for breach of fiduciary duty by the Supplier. The ombudsman found the section 75 misrepresentation claim time-barred under the Limitation Act 1980, rejected the breach of contract claim due to insufficient evidence, and found no unfair credit relationship because: affordability checks were carried out and the lending was affordable; there was insufficient evidence of pressure; even if the Supplier breached regulation 14(3), Mr M's evidence showed he was motivated by pressure rather than investment appeal; the commission was not high enough to render the relationship unfair; and the Supplier did not owe Mr M a fiduciary duty. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to assessing fairness under section 140A of the CCA, considering the standard of the Supplier's commercial conduct, information provision, evidence of what was said at the time of sale, inherent probabilities, and any existing unfairness. Regarding the section 75 claim for misrepresentation, the ombudsman found the claim time-barred under the Limitation Act 1980 (six-year limit from misrepresentation). For breach of contract, the ombudsman found insufficient evidence that the Supplier breached the Purchase Agreement regarding holiday availability, as the paperwork stated availability was subject to demand and Mr M successfully used his points in August 2013. On the section 140A unfair relationship claim, the ombudsman rejected allegations that affordability checks were inadequate, finding the Lender had calculated Mr M's disposable income at approximately £900 monthly after all obligations. The ombudsman found no evidence of pressure that significantly impaired Mr M's choice, noting he had a 14-day cooling-off period and did not cancel. Regarding the alleged breach of regulation 14(3) of the Timeshare Regulations (prohibition on marketing timeshares as investments), the ombudsman found competing evidence but concluded that even if such a breach occurred, it was not causative of Mr M's purchase decision, as Mr M stated he was motivated by pressure rather than investment appeal. The ombudsman applied the Supreme Court's reasoning in Hopcraft, Johnson and Wrench, finding the commission of £2,510.82 (5.34% of charge for credit) was not high enough to render the relationship unfair, particularly given Mr M wanted the product and had no alternative means to pay. The ombudsman rejected allegations of fraudulent misrepresentation regarding the investment potential, finding no evidence the sales representative knew or should have known representations were untrue. The ombudsman also rejected the argument that overall costs (£95,500+ over 19 years) demonstrated irrationality or unfairness, noting Mr M made an informed choice with full knowledge of interest and maintenance fees, and had a cooling-off period.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website