Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the CCA; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission; alleged misrepresentation and breach of contract complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs C purchased fractional timeshare points in the Fractional Club in 2016 and 2017, financed by loans from Shawbrook Bank. They later complained that the product was unfairly marketed as an investment in breach of timeshare regulations, that the lender failed to disclose commission payments to the supplier, and that the credit relationship was unfair under Section 140A of the CCA. The ombudsman found that while regulatory breaches may have occurred, they were not causative of the complainants' purchasing decisions because the evidence showed financial gain was not a motivating factor, the commission was low at 5%, and the complainants would have proceeded with their purchases regardless. No actionable misrepresentation was found under Section 75, and the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A, considering whether regulatory breaches (potential breach of Regulation 14(3) regarding marketing as investment, possible failure to disclose commission, potential information failures under Regulation 12) rendered the credit relationship unfair. The key finding was that even if such breaches occurred, they were not causative of Mr and Mrs C's purchasing decisions because: (1) the prospect of financial gain was not an important motivating factor (evidenced by their awareness of overall costs and their decision to upgrade in 2017); (2) the commission was low (5%) compared to the Johnson case (55%), and disclosure would not have changed their decision; (3) the supplier did not owe a fiduciary duty to Mr and Mrs C; (4) Mr and Mrs C would have proceeded with purchases regardless of any breach. The ombudsman rejected allegations of fraudulent misrepresentation as unsubstantiated and found no actionable misrepresentation under Section 75 because statements about investment returns were opinions rather than false statements of fact, and there was insufficient evidence the supplier knew or should have known they were untrue. The ombudsman also found no repudiatory breach of contract as Mr and Mrs C remained members with continued rights.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website