Not upheld: unfair credit relationship (Section 140A CCA), connected lender liability (Section 75 CCA), irresponsible lending, undisclosed commission complaint against Mitsubishi HC Capital UK Plc trading as Novuna Personal Finance

Decision detail

Summary

Ms M complained that Mitsubishi HC Capital UK Plc (trading as Novuna Personal Finance) acted unfairly by participating in an unfair credit relationship and failing to pay claims under Section 75 of the Consumer Credit Act 1974 relating to her purchase of Fractional Club timeshare membership financed by a £16,989 loan in June 2018. Ms M alleged the product was misrepresented as an investment, that she was pressured into the purchase, that the lender failed to conduct proper affordability checks, and that an undisclosed commission of £679.56 was paid to the supplier. The ombudsman found the lender's credit checks were proportionate based on Ms M's declared income of £1,358 monthly and disposable income of £1,019, that any breach of timeshare regulations did not materially affect her purchasing decision, that the commission was low at 4% and would not have deterred her, and that the supplier did not owe her a fiduciary duty. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that: (1) telling prospective members they were investing in a share of property was not a false statement of fact, as a share in an allocated property was by nature an investment; (2) the lender's credit checks were fair, reasonable and proportionate based on Ms M's declared income of £1,358 monthly and disposable income of £1,019 after existing debts; (3) Ms M was given a 14-day cooling-off period and provided no credible explanation for not cancelling, suggesting she was not significantly impaired in her ability to exercise choice; (4) even if the supplier breached Regulation 14(3) by marketing the product as an investment, the prospect of financial gain was not an important motivating factor in Ms M's purchasing decision based on the limited evidence; (5) the commission of £679.56 was low (4% of amount borrowed) compared to the 55% commission in the Johnson case, and Ms M was provided with pricing information allowing comparison; (6) the supplier did not owe Ms M a fiduciary duty when acting as credit broker, so remedies for secret commission were not available; (7) even with disclosure of the commission, Ms M would likely have proceeded with the purchase as she wanted the timeshare and had no other means to pay for it.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website