Not upheld: Other regulated complaint complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr H and Mrs H purchased Fractional Club timeshare memberships on two occasions (February 2013 and November 2013), financing both purchases through credit agreements with Shawbrook Bank Limited. They subsequently claimed the credit relationships were unfair under Section 140A of the Consumer Credit Act 1974, alleging the Supplier marketed the membership as an investment in breach of the Timeshare Regulations, failed to provide adequate information, and that the Lender failed to disclose commission arrangements with the Supplier. The ombudsman found the first sale complaint was outside FOS jurisdiction. For the second sale, while accepting the possibility of regulatory breaches, the ombudsman found these did not render the credit relationship unfair because Mr H and Mrs H provided no persuasive evidence that investment prospects materially motivated their purchase decision. The ombudsman also rejected arguments regarding undisclosed commission, finding no evidence of concealed ties, conflicted advice, or disproportionate commission. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A analysis, considering whether any regulatory breaches (potential breach of Regulation 14(3) of the Timeshare Regulations regarding marketing as an investment, and possible failure to provide key information under Regulation 12) rendered the credit relationship unfair. While accepting the possibility that the Supplier may have marketed the membership as an investment in breach of Regulation 14(3), the ombudsman found that regulatory breaches do not automatically create unfairness under Section 140A. The critical question was whether any breach materially impacted Mr H and Mrs H's decision to enter into the credit agreement. The ombudsman found that Mr H and Mrs H's written statement contained no mention of investment motivations, and they provided no persuasive evidence that financial gain was an important motivating factor. Therefore, even if a regulatory breach occurred, it was not material to their purchasing decision. Regarding commission disclosure, the ombudsman applied the Supreme Court's framework from Hopcraft, Johnson and Wrench, finding no evidence of undisclosed contractual or commercial ties, no evidence that the Supplier acted as an advisor, and no evidence of conflict of interest. The commission amount (8% of borrowed sum) was not disproportionate. The ombudsman rejected the professional representative's assertions as unsubstantiated, noting that the burden is on the complainant to prove factual allegations to the civil standard, not on the lender to disprove them.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website