Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; section 75 claims (misrepresentation and breach of contract); alleged 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

Mrs L purchased a Fractional Club timeshare membership in November 2012 for £9,207, financed by a £13,072 loan from Novuna Personal Finance. The product included a share in the net sale proceeds of an allocated property. In 2017, Mrs L complained through a professional representative, alleging misrepresentation, breach of contract, unfair credit relationship under section 140A, breach of timeshare regulations, and undisclosed commission. The lender rejected all claims. The ombudsman found no actionable misrepresentation, as Mrs L's motivation was holiday rights rather than investment returns. Although a possible breach of Regulation 14(3) (prohibition on marketing timeshares as investments) was acknowledged, this did not render the credit relationship unfair because Mrs L would have proceeded regardless. The commission of 10.25% was found to be low and not disproportionate. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to assess fairness under section 140A of the Consumer Credit Act 1974, considering: (1) the supplier's commercial conduct and sales practices; (2) information provision at point of sale; (3) evidence of what was said and done; (4) inherent probabilities; and (5) commercial arrangements including commission. While acknowledging it was possible the supplier breached Regulation 14(3) by marketing the product as an investment, the ombudsman found this was not determinative. The key finding was that Mrs L's purchase motivation was the holiday rights, not the prospect of financial gain from the property share. The ombudsman rejected arguments about irresponsible lending, pressure, and misrepresentation as unsupported by evidence. The commission of 10.25% of the loan amount was found to be low and not disproportionate, and would not have changed Mrs L's decision to borrow. Regulatory breaches do not automatically create unfairness under section 140A; their impact must be considered in the round.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website