Not upheld: unfair credit relationship under Section 140A of Consumer Credit Act 1974; connected lender liability under Section 75 of Consumer Credit Act 1974; alleged marketing of timeshare as investment in breach of Timeshare Regulations; undisclosed commission complaint against First Holiday Finance Ltd

Decision detail

Summary

Mr and Mrs V purchased Fractional Club timeshare membership in February 2013 for £11,009 (after trade-in), financing £10,509 through First Holiday Finance Ltd. The Fractional Club membership was asset-backed, including a share in net sale proceeds of a property. Mr and Mrs V complained that: (1) the Supplier made misrepresentations giving them a Section 75 claim against the Lender; and (2) the Lender was party to an unfair credit relationship under Section 140A, including allegations that the membership was marketed as an investment in breach of Timeshare Regulations and that commission was paid but not disclosed. The ombudsman rejected both claims. The Section 75 claim failed because the purchase price exceeded £30,000. The Section 140A claim failed because the ombudsman found Mr and Mrs V's primary motivation was to exit their existing membership with a shorter term, not to achieve investment profit, based on contemporaneous sales notes and assessment of their testimony reliability. The ombudsman also found no commission was paid and no fiduciary duty was owed by the Supplier as credit broker.

The Ombudsman's reasoning

The ombudsman applied a multi-layered analysis. First, on Section 75, the purchase price of £30,149 exceeded the £30,000 statutory limit, so the claim could not succeed under Section 75. Section 75A was not available as it only covers breach of contract, not misrepresentation. Second, on Section 140A, the ombudsman examined whether the credit relationship was unfair by considering: (1) the Supplier's sales and marketing practices; (2) information provision and contractual documentation; (3) evidence of what was said/done at Time of Sale; and (4) inherent probabilities. The ombudsman found Mrs V's testimony unreliable due to inconsistencies (claiming Fractional Club was offered in 2009 when the product did not exist until 2013). The sales notes and questionnaire responses indicated Mr and Mrs V's primary motivation was to exit their existing membership with a shorter term, not to achieve investment profit. Even if the Supplier had breached Regulation 14(3) by marketing as an investment, the ombudsman was not persuaded this motivated the purchase. Regarding commission, the Lender confirmed no commission was paid, distinguishing this case from Hopcraft, Johnson and Wrench. The ombudsman found no fiduciary duty owed by the Supplier as credit broker, and no evidence that the group relationship rendered the credit relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website