Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; misrepresentation claim under Section 75 of the Consumer Credit Act 1974; undisclosed commission; alleged breach of Timeshare Regulations complaint against Clydesdale Financial Services Limited trading as Barclays Partner Finance

Decision detail

Summary

Mr C and Mrs C purchased Fractional Club timeshare membership in October 2013, financing £13,103 through the Lender while paying a £3,276 deposit. The Fractional Club was asset-backed, offering a share in the net sale proceeds of an allocated property. Mr C complained in May 2017 that the Supplier had misrepresented the product and that the Lender had participated in an unfair credit relationship, citing alleged breaches of the Timeshare Regulations and undisclosed commission payments. The ombudsman found no actionable misrepresentation, as the Supplier did not make false statements of existing fact. Although a possible breach of Regulation 14(3) was acknowledged, it was not material to the consumers' decision to purchase, as they were primarily motivated by dissatisfaction with their existing membership rather than investment prospects. The undisclosed commission of £1,069.20 (8.2% of the borrowed amount) was found to be too small to render the credit relationship unfair under Section 140A, particularly as the Supplier did not owe a fiduciary duty and the consumers would have proceeded regardless of disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no factual and material misrepresentation by the Supplier regarding the guaranteed end date or the claim that Fractional Club was the only way to exit existing membership. While the Supplier may have breached Regulation 14(3) by marketing the product as an investment, this was not material to Mr and Mrs C's decision to purchase, as their primary motivation was to exit their existing membership due to dissatisfaction, not to achieve financial gain. The commission of £1,069.20 (8.2% of borrowed amount) was not sufficiently high to render the credit relationship unfair, particularly when compared to the 55% commission in the Supreme Court's Johnson case. The Supplier did not owe Mr C a fiduciary duty when acting as credit broker, and the undisclosed commission did not create a sufficiently extreme inequality of knowledge to render the relationship unfair. Regulatory breaches do not automatically create unfairness under Section 140A; they must be considered in the round with their actual impact on the consumer.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website