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 arrangement complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs B purchased a Fractional Club timeshare membership financed by a £15,588 credit agreement from Shawbrook Bank Limited in October 2017. They later complained that the Supplier misrepresented the product as an investment and that Shawbrook participated in an unfair credit relationship. The ombudsman found no actionable misrepresentation under Section 75 of the CCA and rejected the Section 140A unfair relationship claim. Although the Supplier may have breached the regulatory prohibition on marketing timeshares as investments, this was not material to Mr and Mrs B's decision, which was primarily motivated by holiday access rather than investment returns. The undisclosed commission of 5% was not sufficiently high to render the relationship unfair, and Mr and Mrs B would have proceeded with the loan regardless of disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no actionable misrepresentation by the Supplier under Section 75 of the CCA. While the Supplier may have marketed the membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, this was not material to Mr and Mrs B's decision to purchase, as they were primarily motivated by holiday options and the rental income opportunity rather than investment appreciation. Under Section 140A, the credit relationship was not unfair because: (1) the lending was affordable at the time of sale; (2) any breach of Regulation 14(3) did not materially influence their purchase decision; (3) the commission of 5% was not high and would not have deterred them from taking the loan; (4) the Supplier did not owe a fiduciary duty to Mr and Mrs B when acting as credit broker; and (5) regulatory breaches do not automatically create unfairness under Section 140A—they must be considered in the round with their actual impact on the consumer.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website