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

Decision detail

Summary

Mr M and Mrs L purchased a Fractional Club timeshare membership for £14,065 in September 2016, financed by a loan from Novuna Personal Finance in Mr M's sole name. In November 2018, Mr M complained that the supplier made misrepresentations (including that membership had a guaranteed end date and was an investment) and that the credit relationship was unfair under Section 140A of the CCA, citing potential breaches of the Timeshare Regulations, undisclosed commission, pressure, and inadequate creditworthiness assessment. The lender rejected the complaint, an investigator upheld it, but the lender requested an ombudsman decision. The ombudsman found no actionable misrepresentations because the alleged false statements were either not untrue or unsupported by evidence. Regarding the unfair credit relationship claim, the ombudsman concluded that even if the supplier breached Regulation 14(3) by marketing the timeshare as an investment, Mr M and Mrs L's purchase decision was motivated by holiday benefits rather than investment returns, so they would have proceeded regardless. The undisclosed commission of £348.81 (2.5% of the loan) was not sufficiently high to render the relationship unfair, and the supplier did not owe a fiduciary duty. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A fairness, considering that regulatory breaches do not automatically render a credit relationship unfair. For the misrepresentation claim, the ombudsman found no actionable false statements of existing fact: the guaranteed end date claim was not untrue given the property sale mechanism; the investment claim was not untrue as the membership plainly had an investment element; and other allegations lacked supporting evidence. For the unfair credit relationship claim, the ombudsman examined sales practices, information provision, creditworthiness assessment, pressure, contractual terms, and commission. Regarding the potential breach of Regulation 14(3) (marketing as investment), the ombudsman found the evidence inconclusive but concluded that even if a breach occurred, Mr M and Mrs L's decision to purchase was motivated by holiday benefits rather than investment prospects, so they would have proceeded regardless. On commission, applying Hopcraft, Johnson and Wrench, the ombudsman found the commission level (2.5% of loan, 3.8% of credit charge) was not high enough to render the relationship unfair, the supplier did not owe a fiduciary duty, and Mr M would have taken the loan regardless of disclosure given his desire for the timeshare.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website