Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the Consumer Credit Act 1974; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission arrangements complaint against First Holiday Finance Ltd

Decision detail

Summary

Mrs L complained that First Holiday Finance Ltd acted unfairly by being party to an unfair credit relationship and by rejecting her Section 75 claim regarding the purchase of Fractional Club timeshare membership financed by a £20,700 loan in September 2018. Mrs L alleged the membership was misrepresented as an investment in breach of the Timeshare Regulations and that the lender failed to conduct proper affordability checks. The ombudsman found that while the membership included an investment element (share in property proceeds), the Timeshare Regulations prohibited marketing timeshares as investments but not the existence of investment elements. Although a breach of Regulation 14(3) was possible, the ombudsman concluded it did not render the credit relationship unfair because Mrs L was not motivated by investment prospects, her recollections were unreliable and uncorroborated, and the lending was demonstrably affordable. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while the Fractional Club membership included an investment element (share in property), the Timeshare Regulations prohibited marketing the product as an investment, not the existence of an investment element itself. Although there was competing evidence about whether the supplier breached Regulation 14(3), the ombudsman concluded that even if a breach occurred, it did not render the credit relationship unfair because Mrs L was not motivated by a prospect of financial gain. The ombudsman noted that Mrs L's recollections, provided over six years after purchase and after relevant court judgments, were unreliable and lacked corroboration. The ombudsman also found that the lender did not pay commission to the supplier at the time of sale, distinguishing this case from the Supreme Court's decision in Hopcraft, Johnson and Wrench. The lending was affordable for Mrs L, as evidenced by her regular overpayments and early settlement of the loan.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website