Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; alleged misrepresentation regarding investment potential; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission; irresponsible lending; undue pressure; Section 75 claims handling complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs B purchased a Fractional Club timeshare membership for £9,789 in September 2013, financed by Shawbrook Bank Limited. They complained that the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974, alleging: (1) misrepresentation that the membership was an investment; (2) breach of Regulation 14(3) of the Timeshare Regulations by marketing it as an investment; (3) undisclosed commission of £978.90 paid by the Lender to the Supplier; (4) irresponsible lending; and (5) undue pressure. The ombudsman found that Mr and Mrs B's primary motivation was obtaining a shorter 19-year membership term (rather than investment returns) to avoid burdening their children with perpetual membership costs. The commission was low (9.92% of loan) and would not have changed their decision. The ombudsman concluded the credit relationship was not unfair and upheld the Lender's rejection of Section 75 claims, finding no basis to compensate Mr and Mrs B.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A unfairness, considering: (1) the low commission level (9.92% of loan, far below the 55% in the Supreme Court's Johnson case) and its non-determinative impact on the credit relationship; (2) the absence of a fiduciary duty owed by the Supplier to Mr and Mrs B, meaning secret commission remedies were unavailable; (3) the primary motivation for purchase being the shorter 19-year term rather than investment prospects, meaning Mr and Mrs B would have proceeded regardless of any Regulation 14(3) breach; (4) the affordability of the loan and absence of undue pressure; (5) the distinction between regulatory breaches and unfairness under Section 140A, which requires consideration in the round rather than technical application; (6) the lack of evidence that sales representatives knew or should have known representations about financial gain were false; (7) the subjective nature of assertions about holiday costs being exorbitant when Mr and Mrs B knew what they were purchasing.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website