Not upheld: unfair credit relationship under Section 140A CCA; connected lender liability under Section 75 CCA; alleged breach of Timeshare Regulations; undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs M purchased a Fractional Club timeshare membership for £12,044 in June 2013, financed by Shawbrook Bank Limited. In April 2019, they complained that the lender acted unfairly by being party to an unfair credit relationship and by rejecting their Section 75 claims against the supplier. The complainants alleged the supplier misrepresented the product, breached the Timeshare Regulations by marketing it as an investment, and that the lender failed to disclose a commission arrangement. The ombudsman found no actionable misrepresentations or breaches of contract, and determined that even if the supplier had breached the Timeshare Regulations, the complainants' primary motivation was to exit their existing points system rather than achieve investment gain. The undisclosed commission of 8% was found to be too low to render the credit relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 75 and Section 140A of the Consumer Credit Act 1974, along with the Timeshare Regulations. On Section 75 misrepresentation claims, the ombudsman found insufficient evidence of actionable misrepresentations regarding exit guarantees or exclusivity. On breach of contract claims, the ombudsman found that availability limitations were disclosed and Mr and Mrs M had used the membership, so no breach was established. Regarding Section 140A unfairness, the ombudsman considered whether the supplier breached Regulation 14(3) by marketing the product as an investment. While acknowledging this was possible, the ombudsman found that Mr and Mrs M's primary motivation was to exit their existing points system, not to achieve investment gain, so any breach would not have been material to their decision. On commission disclosure, the ombudsman applied the Supreme Court's Hopcraft, Johnson and Wrench principles, finding that the 8% commission was not high enough to render the relationship unfair, particularly given that Mr and Mrs M wanted the product and had no alternative means of payment. The ombudsman concluded that even with full disclosure, they would have proceeded with the loan.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website