Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; section 75 claim for misrepresentation; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr O and Miss S purchased a Fractional Club timeshare membership for £14,430 in July 2018, financed by Shawbrook Bank Limited. They complained in December 2021 that the supplier had misrepresented the product as an investment in breach of Regulation 14(3) of the Timeshare Regulations, and that the lender had failed to conduct proper affordability checks and had not disclosed a commission payment of £721.50 to the supplier. The ombudsman found no actionable misrepresentation under section 75 of the Consumer Credit Act 1974. Although acknowledging the possibility of a breach of Regulation 14(3), the ombudsman concluded that even if such a breach occurred, it did not render the credit relationship unfair under section 140A because Mr O and Miss S's primary motivation was obtaining holiday rights rather than investment returns, and they would have proceeded with the purchase regardless. The ombudsman gave limited weight to Mr O and Miss S's late, unsigned, undated written recollections about the sale, finding a real risk they were influenced by subsequent litigation. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A, considering whether regulatory breaches automatically create unfairness (they do not). On the section 75 claim, the ombudsman found no actionable misrepresentation by the supplier regarding investment potential, guaranteed end dates, exclusivity, or being the only exit route. Regarding the alleged breach of Regulation 14(3) (prohibition on marketing timeshares as investments), the ombudsman found competing evidence but concluded that even if a breach occurred, it was not material to Mr O and Miss S's decision to purchase, as their primary motivation was holiday entitlement rather than investment returns. The ombudsman gave limited weight to Mr O and Miss S's late, unsigned, undated written recollections, finding a real risk they were influenced by the Shawbrook & BPF v FOS judgment. On commission, the ombudsman distinguished the case from the Supreme Court's Johnson decision, finding the 5% commission was not high enough to render the relationship unfair, and that Mr O and Miss S would have proceeded with the loan regardless of disclosure. The ombudsman found the supplier did not owe a fiduciary duty when acting as credit broker.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website