Upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; breach of regulation 14(3) of the Timeshare Regulations (marketing timeshare as investment) complaint against First Holiday Finance Ltd

Decision detail

Summary

Mr N purchased Fractional Club timeshare membership in February 2012 for £16,758, financed by the Lender under Credit Agreement 2. The Fractional Club was asset-backed, providing both holiday rights and a share in the net sale proceeds of a property. Mr N alleged the Supplier marketed and sold the membership as an investment, contrary to regulation 14(3) of the Timeshare Regulations, which prohibits marketing timeshares as investments. The ombudsman found that the Supplier's training materials and sales presentation indicated the product was marketed as combining holidays with investment features offering financial returns, and Mr N's testimony that he was told he would recover his investment with interest was credible and corroborated by the training manual. This breach was material to Mr N's purchase decision, rendering the credit relationship unfair under section 140A of the CCA. The ombudsman ordered the Lender to refund all loan repayments, management charges, and maintenance charges (with specified deductions), add 8% simple interest, remove adverse credit file information, and indemnify Mr N against ongoing liabilities, with an agreed settlement of £24,235.88.

The Ombudsman's reasoning

The ombudsman found that although the Supplier included disclaimers stating the Fractional Club was not an investment, the overall sales presentation and training materials indicated that sales representatives marketed the product as combining holiday benefits with investment features offering financial returns. The training manual's 'Why Fractional?' slide presented the product as the 'Best of Both Worlds' combining holiday choice with an investment that could be used, enjoyed and sold for money back. Mr N's testimony that he was told he would get his money back with interest after 19-20 years, corroborated by the training manual, demonstrated the Supplier breached regulation 14(3) by marketing the product as an investment. This breach was material to Mr N's decision to purchase, as the prospect of financial gain was an important motivating factor. The Lender, by financing this purchase, participated in an unfair credit relationship under section 140A. The ombudsman rejected arguments that Mr N's evidence was unreliable, finding it adequately corroborated by the training manual despite some minor inconsistencies in his recollection.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website