Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the CCA; undisclosed commission; alleged breach of Timeshare Regulations 2010 Regulation 14(3) complaint against Mitsubishi HC Capital UK PLC trading as Novuna Consumer Finance

Decision detail

Summary

Mr T and Mrs T purchased Fractional Club timeshare membership for £10,300 in November 2012, financed by a loan from the Lender. The Fractional Club included a share in the net sale proceeds of an Allocated Property (an investment element). In January 2017, Mr T complained that the Supplier had misrepresented the product, breached contract, and that the credit relationship was unfair under Section 140A, citing alleged breaches of the Timeshare Regulations and undisclosed commission. The Lender rejected all complaints. The ombudsman found no unfair credit relationship because: (1) even if the Supplier breached Regulation 14(3) by marketing the product as an investment, Mr T was not motivated by the investment element (his original complaint did not raise this issue until 2023, after relevant case law); (2) the commission of 5.61% of the charge for credit was not disproportionately high; (3) Mr T would have proceeded with the purchase regardless of any breach or non-disclosure; and (4) no actionable misrepresentation or breach of contract by the Supplier was established. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A, considering: (1) whether the Supplier breached Regulation 14(3) by marketing the Fractional Club as an investment; (2) whether such a breach was causative of Mr T's decision to purchase; (3) the size and disclosure of commission (5.61% of charge for credit, far lower than the 55% in Johnson); (4) whether Mr T would have proceeded regardless of any breach or non-disclosure; and (5) whether the Supplier owed a fiduciary duty to Mr T. The ombudsman found that even if a breach of Regulation 14(3) occurred, Mr T was not motivated by the prospect of financial gain from the investment element, as evidenced by his original complaint not raising this issue until 2023 (after Shawbrook v FOS). The ombudsman rejected the argument that regulatory breaches automatically create unfairness, citing Plevin and case law on causation. The commission was not disproportionately high, and Mr T would have proceeded with the loan regardless of disclosure. The Supplier did not owe a fiduciary duty, so secret commission claims failed. No Section 75 misrepresentation or breach of contract was established.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website