Not upheld: irresponsible lending, unfair credit relationship under section 140A CCA, connected lender liability under section 75 CCA, alleged breach of Timeshare Regulations complaint against Clydesdale Financial Services Limited (trading as Barclays Partner Finance)

Decision detail

Summary

Mr M purchased Fractional Club timeshare membership for £11,990 in August 2016, financed through a credit agreement with the Lender. Approximately 7.5 years later, he complained that the Lender was party to an unfair credit relationship and failed to accept his section 75 claim for misrepresentation and breach of contract by the Supplier. The ombudsman found that Mr M's misrepresentation claim was time-barred under the Limitation Act 1980 but could be considered under section 140A of the CCA. However, the ombudsman concluded that no actionable misrepresentation occurred - the Supplier's statements about investment potential and property share were not false statements of existing fact. While a possible breach of regulation 14(3) (prohibition on marketing timeshares as investments) could not be ruled out, the ombudsman found that such a breach would not have rendered the credit relationship unfair because the evidence demonstrated that Mr M's purchase was not motivated by the prospect of financial gain but rather by pressure from the Supplier, and he would have proceeded regardless. The low commission (2.32% of charge for credit) and Mr M's access to pricing information further supported the conclusion that the credit relationship was not unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A, considering whether the credit relationship was unfair in all the circumstances. Key reasoning: (1) The misrepresentation claim was time-barred under the Limitation Act 1980 (brought 7.5 years after time of sale, 6-year limit applies), but could be considered under section 140A which has a different time limit running from when the loan ends; (2) No actionable misrepresentation was proven - the Supplier's statements about investment potential and property share were not false statements of existing fact; (3) While a possible breach of regulation 14(3) (prohibition on marketing timeshares as investments) could not be ruled out, such regulatory breaches do not automatically create unfairness under section 140A; (4) Critically, the evidence did not show that the prospect of financial gain was an important motivating factor in Mr M's purchase decision - his own witness statement suggested pressure was the main driver; (5) The commission of 2.32% of charge for credit was low and not disproportionate, unlike the 55% in the Johnson case; (6) Mr M had information about the price, interest rate, fees, APR and monthly repayments, allowing him to understand and compare the cost; (7) No evidence of undisclosed commercial ties between Lender and Supplier; (8) The debenture would not have affected Mr M's holiday entitlement and was satisfied in 2018; (9) Even if regulatory breaches occurred, they did not materially impact Mr M's decision-making.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website