Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; Section 75 claims; alleged breach of Timeshare Regulations; undisclosed commission complaint against First Holiday Finance Ltd

Decision detail

Summary

Mr and Mrs C purchased timeshare products financed through four credit agreements with First Holiday Finance (British Virgin Islands entity) between 2011 and 2014, totalling £80,564. They complained that First Holiday Finance acted unfairly by declining Section 75 claims for alleged misrepresentation and breach of contract, and by participating in an unfair credit relationship under Section 140A of the Consumer Credit Act 1974. The ombudsman found that Section 75 claims were outside FOS jurisdiction because the original lender operated outside the UK and the loans were settled before the UK entity took over. For the Section 140A claim on the final loan (which the UK entity did administer), the ombudsman concluded the credit relationship was not unfair because any regulatory breaches by the Supplier regarding timeshare marketing were not material to Mr and Mrs C's purchasing decision, which was motivated by reducing annual management charges rather than investment prospects, and the undisclosed commission arrangements did not create sufficient inequality of knowledge to render the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that Section 75 claims could not succeed because the original creditor was FHFBVI (operating outside the UK), and while it assigned the loan book to First Holiday Finance, this did not necessarily transfer Section 75 liability to the assignee. For Credit Agreements 1-3, the complaint fell outside the FOS's territorial jurisdiction because the regulated activity was carried out by FHFBVI from outside the UK and the loans were settled before the UK entity began operations. For Credit Agreement 4, although Section 140A applied, the ombudsman found the credit relationship was not unfair because: (1) any breach of Regulation 14(3) of the Timeshare Regulations (marketing as investment) was not material to Mr and Mrs C's decision, which was motivated by reducing annual management charges rather than investment prospects; (2) any information failings regarding ongoing costs were not material to their purchasing decision; (3) the commission arrangements did not create a sufficiently extreme inequality of knowledge to render the relationship unfair, particularly as no commission was paid to the Supplier at the time of sale by First Holiday Finance; and (4) the commercial tie between the Supplier and First Holiday Finance was not adequately disclosed but did not render the relationship unfair given the circumstances.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website