Not upheld: unfair credit relationship (Section 140A CCA), connected lender liability (Section 75 CCA), undisclosed commission, alleged breach of Timeshare Regulations complaint against Mitsubishi HC Capital UK PLC (trading as Novuna Consumer Finance)

Decision detail

Summary

Mr R purchased Fractional Club timeshare membership in 2011 for £12,999, financed through a credit agreement with Novuna Consumer Finance. In 2018, through a professional representative, he complained that the supplier had misrepresented the product, that the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974, and that undisclosed commission payments rendered the relationship unfair. The FOS Investigator initially upheld the complaint, but the lender requested an ombudsman decision. The ombudsman found no actionable misrepresentation, no breach of contract, and no unfair credit relationship. Although the ombudsman acknowledged the possibility that the supplier may have breached Regulation 14(3) of the Timeshare Regulations by marketing the product as an investment, it concluded this did not render the credit relationship unfair because Mr R's purchase motivation was not investment-based and the commission level (10% of borrowing, 5% of credit charge) was not disproportionate when compared to the Supreme Court's guidance. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no actionable misrepresentation by the supplier regarding the guaranteed end date, exclusive access to resorts, or that membership was the only way to exit existing membership. While acknowledging the possibility that the supplier may have breached Regulation 14(3) by marketing the product as an investment, the ombudsman concluded this was not determinative because: (1) Mr R's decision to purchase was not motivated by the prospect of financial gain; (2) the commission of 10% was not high enough to render the relationship unfair when compared to the Supreme Court's guidance in Hopcraft, Johnson and Wrench (which involved 55% commission); (3) Mr R was provided with pricing information and could compare options; (4) the supplier did not owe a fiduciary duty to Mr R; and (5) regulatory breaches do not automatically create unfairness under Section 140A. The ombudsman gave limited weight to Mr R's written statement provided in 2023, nearly 12 years after the sale, noting the risk of vague or inaccurate recollections and potential influence from the Shawbrook judgment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website