Not upheld: unfair credit relationship; irresponsible lending; pressure sales; undisclosed commission; breach of timeshare regulations (Regulation 14(3)); misrepresentation complaint against Mitsubishi HC Capital UK PLC (trading as Novuna, formerly Hitachi)

Decision detail

Summary

Mr T purchased FPOC timeshare membership for £9,900 in October 2013, financed by a 10-year credit agreement from Novuna at 18.9% APR (total repayable £22,659.60). He complained that Novuna was party to an unfair credit relationship, alleging: irresponsible lending without proper affordability checks; pressure sales lasting until 9pm; undisclosed commission to the Supplier; and breach of timeshare regulations by selling the membership as an investment. The ombudsman found no evidence supporting these allegations. Mr T's claim that the membership was sold as an investment was only raised after a Supreme Court judgment on similar cases, and evidence suggested his recollections were unreliable and influenced by that judgment. The ombudsman found the sales process, while lengthy, did not constitute undue pressure, especially given Mr T upgraded his membership in 2014. Affordability checks were conducted, and the loan was affordable at the time of sale. Commission of 9.75% was not high enough to render the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 140A of the Consumer Credit Act 1974, which requires consideration of whether a credit relationship was unfair to the debtor. The ombudsman examined: (1) the Supplier's sales and marketing practices; (2) information provision; (3) affordability of the loan; (4) whether FPOC was sold as an investment in breach of Regulation 14(3) of the Timeshare Regulations; (5) undisclosed commission arrangements. On pressure sales, the ombudsman found insufficient evidence that Mr T was unduly pressured, noting he willingly upgraded his membership in 2014 and had a 14-day cooling-off period. On affordability, the ombudsman found no evidence the loan was unaffordable at the time of sale, and Mr T's later unemployment was not foreseeable. On the investment allegation, the ombudsman found Mr T only raised this after the Shawbrook & BPF v FOS judgment, not in his original complaint, suggesting his memory was influenced by that judgment. The ombudsman noted Letter A appeared to have additions made after the original Letter B, undermining its reliability. On commission, the ombudsman applied the Supreme Court's Hopcraft, Johnson and Wrench principles, finding the 9.75% commission was not high enough to render the relationship unfair, especially given Mr T wanted the timeshare and had no other means to pay. The ombudsman concluded that even if regulatory breaches occurred, they did not automatically create unfairness under Section 140A, and the impact on Mr T must be considered holistically.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website