Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; alleged breach of Section 75 claim; alleged breach of Regulation 14(3) of the Timeshare Regulations 2010 complaint against Mitsubishi HC Capital UK PLC (trading as Novuna Consumer Finance, formerly Hitachi Capital Consumer Finance)

Decision detail

Summary

Mr D complained that Mitsubishi HC Capital UK PLC (trading as Novuna Consumer Finance) acted unfairly by being party to an unfair credit relationship and by rejecting his Section 75 claim relating to the purchase of Fractional Club timeshare membership in November 2011. Mr and Mrs D had been long-standing timeshare members and purchased the Fractional Club membership, which included a share in a property's net sale proceeds, for £11,099 financed by Mr D's loan. Following the death of their two children in 2011, they sought to exit their existing membership. The ombudsman found that while there was competing evidence about whether the Supplier marketed the product as an investment in breach of Regulation 14(3) of the Timeshare Regulations, this was not determinative. The key finding was that Mr and Mrs D's motivation was to recover some value from their long-standing membership, not to make a profit, meaning any regulatory breach was not causative of their purchase decision. Therefore, the credit relationship was not rendered unfair, and the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 140A of the Consumer Credit Act 1974, which allows a credit relationship to be found unfair based on the terms of the agreement, how rights were exercised, or any other thing done by the creditor or on its behalf. The Supplier's negotiations were deemed to be conducted as the Lender's statutory agent under Section 56. While the ombudsman acknowledged there was competing evidence about whether the Fractional Club was marketed as an investment in breach of Regulation 14(3) of the Timeshare Regulations, the key finding was that even if such a breach occurred, it was not causative of the purchase decision. The ombudsman found that Mr and Mrs D's primary motivation was to exit their existing membership following personal tragedy, not to make a profit from the property share. The ombudsman rejected the argument that any financial return element constitutes marketing as an investment, adopting the definition that an investment requires expectation of financial gain or profit. Without causation between any regulatory breach and the purchase decision, the credit relationship could not be found unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website