Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; alleged breach of Timeshare Regulations; alleged mis-selling as investment complaint against First Holiday Finance Limited

Decision detail

Summary

Mr and Mrs S complained that First Holiday Finance Limited participated in an unfair credit relationship by financing their purchase of Fractional Club timeshare membership in August 2013. The membership was asset-backed and included a share in property sale proceeds. The complainants alleged the Supplier breached Timeshare Regulations by marketing it as an investment, that it was a Collective Investment Scheme, and that high-pressure sales tactics were used. The ombudsman found that while the Supplier may have breached Regulation 14(3), this did not automatically render the credit relationship unfair under Section 140A. The key finding was that Mr and Mrs S were motivated by accommodation quality and exclusive access, not investment returns, making any regulatory breach immaterial to their purchase decision. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 140A of the Consumer Credit Act 1974, which allows courts to make orders if a credit relationship is unfair to the debtor. The ombudsman examined: (1) the Supplier's commercial conduct and sales practices; (2) information provision; (3) commission arrangements; (4) evidence of what was said at the time of sale; and (5) inherent probabilities. While acknowledging that the Supplier may have breached Regulation 14(3) by marketing the membership as an investment, the ombudsman concluded this was not determinative. The key finding was that Mr and Mrs S were not motivated by the prospect of financial gain or profit from the investment element. Their own statement indicated they were motivated by the quality of accommodation and exclusive membership access. The ombudsman found that even if a regulatory breach occurred, it was not material to their decision to purchase, and therefore did not render the credit relationship unfair. The ombudsman also rejected the Collective Investment Scheme argument as the timeshare contract was exempt. Regarding information provision, while the Supplier may not have fully complied with Regulation 12, there was no evidence the complainants would have acted differently with fuller disclosure.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website