Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the CCA; alleged breach of Timeshare Regulations 2010 Regulation 14(3); undisclosed commission complaint against Mitsubishi HC Capital UK PLC

Decision detail

Summary

Mr S purchased Fractional Club timeshare membership in March 2012 for £7,386 financed by Mitsubishi HC Capital UK PLC. The membership included a share in an Allocated Property's net sale proceeds. In August 2018, more than six years later, Mr S complained that the Lender was party to an unfair credit relationship and should pay Section 75 claims for alleged misrepresentations and breaches by the Supplier. The ombudsman found the Section 75 misrepresentation claim time-barred under the Limitation Act 1980. While acknowledging a possible breach of the Timeshare Regulations prohibition on marketing timeshares as investments, the ombudsman found Mr S's own evidence did not support that the investment element motivated his purchase. The undisclosed commission of £757.02 (9-10% of credit) was found to be low and proportionate, and Mr S would have proceeded regardless of disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A unfairness, considering that regulatory breaches do not automatically render a credit relationship unfair. The Section 75 misrepresentation claim was rejected as time-barred (more than six years after the Time of Sale). Regarding the alleged breach of Regulation 14(3) (marketing as investment), while the ombudsman found it possible such a breach occurred, Mr S's own evidence did not demonstrate that the prospect of financial gain was a motivating factor in his purchase decision. The commission of £757.02 (9-10%) was found to be low and not disproportionate, unlike the 55% commission in the Johnson case. The ombudsman found no evidence that Mr S would have acted differently had the commission been disclosed. The Supplier was not found to owe Mr S a fiduciary duty when acting as a credit broker, as it was not acting as his agent but as the seller of timeshare rights.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website