Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; connected lender liability under section 75 of the Consumer Credit Act 1974; alleged breach of regulation 14(3) of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010; undisclosed commission payments complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs E purchased a timeshare Fractional Club membership in January 2019 financed by Shawbrook Bank Limited, which included an asset-backed share in an Allocated Property. Over five years later, they complained that the Lender was party to an unfair credit relationship and failed to accept section 75 claims for misrepresentation and breach of contract by the Supplier. The ombudsman found no actionable misrepresentation (the investment element was truthfully described), no breach of contract (holiday availability was subject to demand as disclosed), and that even if the Supplier breached regulation 14(3) by marketing the product as an investment, this did not render the credit relationship unfair because Mr and Mrs E's own evidence showed investment was not a motivating factor in their purchase decision. The modest commission payments (5% of amounts borrowed) would not have deterred the purchase, and the Supplier did not owe a fiduciary duty when acting as credit broker. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A, finding that regulatory breaches do not automatically create unfairness. The key reasoning was: (1) no actionable misrepresentation occurred as the investment element was truthfully described and Mr and Mrs E were not motivated by investment prospects; (2) no breach of contract was demonstrated as holiday availability was subject to demand as disclosed; (3) while a possible breach of regulation 14(3) existed, it was not causative of the purchase decision as Mr and Mrs E did not mention investment as a motivating factor in their witness statement; (4) commission payments were modest (27.2% and 4.63% of charge for credit respectively, compared to 55% in the Johnson case) and would not have deterred the purchase; (5) information failings, even if they existed, would not have changed the purchasing decision given the lack of investment motivation; (6) the Supplier did not owe a fiduciary duty to Mr and Mrs E when acting as credit broker, so secret commission remedies were unavailable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website