Not upheld: irresponsible lending, misrepresentation, unfair credit relationship under Section 140A Consumer Credit Act 1974, breach of Section 75 connected lender liability, breach of Timeshare Regulations complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs M complained that Shawbrook Bank Limited acted unfairly by participating in an unfair credit relationship and rejecting Section 75 claims regarding their 2014 purchase of Fractional Club timeshare membership financed by a £30,629 credit agreement. They alleged the supplier misrepresented the product as an investment, breached timeshare regulations, applied unfair contract terms, and that the lender failed to conduct proper affordability checks and failed to disclose commission arrangements. The ombudsman found no actionable misrepresentation, no breach of contract, and no unfair credit relationship. While acknowledging possible regulatory breaches, the ombudsman determined that Mr and Mrs M's primary motivation was holiday rights rather than investment returns, and they would have proceeded with the purchase regardless of any breach. The commission arrangement, at 5% of the credit charge, was modest and did not create unfairness comparable to cases involving much higher undisclosed commissions.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A, considering whether regulatory breaches automatically created unfairness. While acknowledging possible breaches of Regulation 14(3) (prohibition on marketing timeshares as investments), the ombudsman found that causation was important: Mr and Mrs M would likely have purchased regardless of any breach because the prospect of financial gain was not their primary motivation. Their statement and purchasing history (seven timeshare purchases in seven years) suggested they were primarily motivated by holiday rights, not investment returns. The ombudsman distinguished the case from Hopcraft/Johnson on the basis that the commission was low (5% of charge for credit versus 55% in Johnson's case), Mr and Mrs M had pricing information, and there was no evidence of a fiduciary duty owed by the supplier when acting as credit broker.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website