Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; section 75 claim rejection; alleged breach of Timeshare Regulations regulation 14(3); undisclosed commission complaint against Mitsubishi HC Capital UK PLC, trading as Novuna Personal Finance (formerly Hitachi Capital Consumer Finance)

Decision detail

Summary

Ms O purchased Fractional Club timeshare membership in July 2013 for £14,749 using a loan from the Lender. The membership included a share in an allocated property's net sale proceeds. Over 10 years later, Ms O complained that the Supplier had misrepresented the product as an investment in breach of regulation 14(3) of the Timeshare Regulations, that the Lender failed to conduct affordability checks, that she was pressured into the purchase, and that commission was undisclosed. The ombudsman found the misrepresentation claim time-barred under the Limitation Act 1980 and rejected the section 140A unfair credit relationship claim because Ms O's purchase was not materially motivated by the investment prospect, evidenced by her attempting to end membership due to holiday unavailability and upgrading her purchase one year later. The commission was relatively low (8.71% of charge for credit) and would not have changed her decision. No remedy was ordered.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A, considering whether regulatory breaches automatically create unfairness (they do not). The key finding was that even if the Supplier breached regulation 14(3) by marketing the timeshare as an investment, this did not render the credit relationship unfair because Ms O's purchase decision was not materially motivated by the prospect of financial gain. Evidence supporting this included: (1) Ms O's own witness statement did not identify the investment as her reason for purchase; (2) she attempted to end her membership due to holiday unavailability, suggesting the investment was not important to her; (3) she upgraded her purchase one year later, inconsistent with being pressured; (4) she was given a 14-day cooling-off period which she did not use; (5) the commission was relatively low (8.71% of charge for credit) compared to the Supreme Court's threshold in Johnson; and (6) Ms O knew the cost of borrowing, annual charges, and holiday entitlements. The ombudsman rejected allegations of fraudulent misrepresentation, finding no evidence that sales representatives knew or should have known their representations were false. The section 75 misrepresentation claim was time-barred under the Limitation Act 1980. The breach of contract claim regarding holiday availability was not substantiated as the Purchase Agreement stated availability was subject to demand.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website