Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; section 75 connected lender liability; alleged breach of Timeshare Regulations 2010 (Regulation 14(3)); undisclosed commission; unfair contract terms complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs C purchased a Fractional Club timeshare membership in 2014 for £13,949 using finance from Shawbrook Bank. The membership included both holiday rights and a share in the net proceeds from the eventual sale of an allocated property. In 2018, they complained that the product had been misrepresented as an investment in breach of the Timeshare Regulations, that the lender had failed to conduct proper affordability checks, that the credit relationship was unfair under section 140A, and that commission paid to the supplier had not been disclosed. The ombudsman found no actionable misrepresentation or breach of contract, and concluded that even if the supplier had breached the prohibition on marketing timeshares as investments, this was not a material factor in Mr and Mrs C's decision to purchase. The ombudsman also found the undisclosed commission of 10% to be proportionate and would not have prevented the purchase. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A unfairness, finding that regulatory breaches do not automatically create unfairness and must be considered in the round with their actual impact on the consumer. Regarding the alleged marketing as an investment in breach of Regulation 14(3), the ombudsman found that even if such a breach occurred, it was not a material motivating factor in Mr and Mrs C's purchase decision. The ombudsman placed limited weight on Mr and Mrs C's recollections provided four years after the complaint was made, finding a real risk they were influenced by subsequent court judgments. Regarding commission, the ombudsman distinguished the case from Hopcraft/Johnson/Wrench on the basis that the commission was only 10% of the amount borrowed (compared to 55% in Mr Johnson's case), Mr and Mrs C had full information about the credit cost, and there was no evidence of a fiduciary duty owed by the supplier. The ombudsman concluded that even with full disclosure of commission, Mr and Mrs C would have proceeded with the purchase as they wanted the timeshare and had no alternative means of funding it.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website