Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; Section 75 claim handling; undisclosed commission; irresponsible lending; default and credit file management complaint against Clydesdale Financial Services Limited (trading as Barclays Partner Finance)

Decision detail

Summary

Ms B purchased a Fractional Club timeshare membership in October 2016 for £11,144, financed by a £15,023 credit agreement from the Lender. She traded in this membership in February 2017 but continued paying the credit agreement until 2022, when she paused payments based on a mistaken belief that this loan was linked to a separate 2017 timeshare purchase. The Lender defaulted her account. Ms B complained in February 2024 alleging the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974 and that the Lender should have upheld a Section 75 claim. The ombudsman rejected all grounds: the Section 75 claim was time-barred under the Limitation Act 1980; the credit relationship was not unfair as the commission was modest (2.5%), the Supplier owed no fiduciary duty, and Ms B would have proceeded regardless; and the default was appropriately managed as Ms B deliberately paused payments based on her own mistaken belief about loan linkage.

The Ombudsman's reasoning

The ombudsman applied the Limitation Act 1980 to find that Ms B's Section 75 claim was time-barred, as it was not made within six years of the purchase (October 2016) or the trade-in (February 2017). Regarding the Section 140A unfair credit relationship claim, the ombudsman considered the Hopcraft, Johnson and Wrench principles and found that: (1) the commission of 2.5% was not high and did not create disproportionate cost; (2) the Supplier was not acting as Ms B's agent but as a seller, without a fiduciary duty; (3) regulatory breaches do not automatically render a credit relationship unfair; (4) Ms B would have proceeded with the loan regardless of commission disclosure given her desire for the timeshare and lack of alternative funding; (5) the Supplier's role as credit broker was incidental to its role as seller. The ombudsman also rejected arguments about the default, finding that Ms B deliberately paused payments based on an erroneous belief that the two loans were linked, and that she had demonstrated understanding of the separate nature of the loans by continuing to pay from 2017-2022.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website