Upheld: irresponsible lending / unfair credit relationship / breach of Timeshare Regulations (Regulation 14(3)) / marketing timeshare as investment complaint against Clydesdale Financial Services Limited trading as Barclays Partner Finance

Decision detail

Summary

Mrs B, a long-time timeshare customer, purchased Fractional Club membership in July 2014 for £6,840 financed by the Lender. The Fractional Club was asset-backed, offering both holiday rights and a share in the net sale proceeds of an Allocated Property. Mrs B complained that the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing the product as an investment, and that this rendered her credit relationship with the Lender unfair under Section 140A of the Consumer Credit Act 1974. The Ombudsman upheld the complaint, finding that despite the Supplier's formal policies against marketing the product as an investment, the practical sales approach implied Mrs B would recover her money or make a profit when the property was sold. The Ombudsman rejected the Lender's argument that Mrs B was motivated by flexibility, noting her reservation history showed she consistently returned to the same two resorts, making investment motivation the more plausible reason for the purchase. The Ombudsman ordered the Lender to refund all repayments, cancel any outstanding balance, refund the difference in annual management charges, add 8% simple interest, remove adverse credit information, and indemnify Mrs B against ongoing liabilities related to the membership.

The Ombudsman's reasoning

The Ombudsman found that although the Supplier had formal policies against marketing the Fractional Club as an investment and included disclaimers in paperwork, the practical reality of the sale differed. The Ombudsman considered: (1) the Supplier's internal materials showing awareness of the investment element and its value-enhancing potential; (2) Mrs B's credible first-hand account of being told the product was an investment vehicle offering financial returns; (3) the inherent difficulty in marketing fractional ownership timeshares without implying investment returns; (4) Mrs B's reservation history showing she was not motivated by flexibility (the stated reason in sales notes), suggesting investment motivation was material to her decision; and (5) the Government's guidance that marketing a timeshare as an investment includes implying the cost would be recoupable at profit. The Ombudsman concluded the Supplier breached Regulation 14(3) by stating or implying Mrs B would at least recover her money when the Allocated Property was sold. Under Section 56 of the CCA, the Supplier's conduct was deemed to be that of the Lender's agent, making the credit relationship unfair under Section 140A. The breach was material to Mrs B's decision to enter the agreement, as evidenced by her statement and the implausibility of flexibility being her motivation given her actual usage patterns.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website