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

Decision detail

Summary

Mr W purchased Fractional Club membership (a timeshare product with an investment element) in November 2018, financing it with a £19,587 loan from Tandem Bank Limited. He subsequently complained that the product was marketed as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that he could not access desired holidays, and that the Lender failed to disclose commission arrangements. Mr W alleged the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974 and claimed the Lender was liable under Section 75 for the Supplier's misrepresentations and breach of contract. The ombudsman found no actionable misrepresentation, insufficient evidence of breach of contract regarding holiday availability, and that any breach of Regulation 14(3) was not material to Mr W's purchase decision. The ombudsman also found the 2.5% commission was not so high as to render the relationship unfair and that Mr W would have proceeded with the loan regardless of disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A analysis, considering the entirety of the credit relationship rather than isolated regulatory breaches. While accepting that the Supplier may have breached Regulation 14(3) by marketing the product as an investment, the ombudsman found this was not material to Mr W's decision to purchase, as the evidence suggested he was primarily motivated by holiday options rather than investment returns. The ombudsman rejected the argument that regulatory breaches automatically create unfairness, instead requiring consideration of their actual impact. On Section 75 claims, the ombudsman found no actionable misrepresentation (as opinions about property appreciation are not factual misrepresentations) and insufficient evidence of breach of contract regarding holiday availability. Regarding commission, the ombudsman distinguished the case from the Supreme Court's Johnson decision on the basis that the 2.5% commission was not 'so high' as to be a powerful indication of unfairness, there was no evidence of a concealed commercial tie, and Mr W would have proceeded with the loan regardless of disclosure.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website