Not upheld: connected lender liability (Section 75 CCA), unfair credit relationship (Section 140A CCA), alleged misrepresentations regarding timeshare product, alleged breach of Timeshare Regulations, undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs H, long-term timeshare customers, purchased a Fractional Club membership in March 2013 for £32,085, trading in existing points worth £19,000 and borrowing £7,085 from Shawbrook Bank. They subsequently complained that the Supplier had misrepresented the product as an investment in breach of the Timeshare Regulations and that the credit relationship was unfair under Section 140A of the CCA. The ombudsman found that Section 75 of the CCA did not apply due to the purchase price exceeding £30,000. On the Section 140A claim, the ombudsman concluded that even if regulatory breaches had occurred, the evidence demonstrated Mr and Mrs H were primarily motivated by the shorter 15-year term to exit their perpetual European Collection membership, not by investment prospects, as evidenced by internal Supplier notes and deal sheets. The commission of £588 (8% of the loan) was not at a level that would render the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the balance of probabilities standard in an inquisitorial jurisdiction, not an adversarial one. Section 75 did not apply as the purchase price (£32,085) exceeded £30,000. Regarding alleged misrepresentations: (1) statements about the property sale date were opinions held by the salesperson with reasonable grounds, not false statements of fact; (2) the omission to disclose exit policies did not constitute actionable misrepresentation as silence generally does not; (3) the evidence strongly suggested Mr and Mrs H were motivated by the shorter 15-year term (to exit their European Collection membership), not by investment prospects, as evidenced by the deal sheet answer '2027' and the Supplier's note that Mrs H knew not to view it as an investment. Even if Regulation 14(3) of the Timeshare Regulations had been breached regarding marketing as an investment, this did not render the credit relationship unfair because Mr and Mrs H's purchase decision was not motivated by investment prospects. The commission of £588 (8% of loan, 6.9% of charge for credit) was not at a level that would render the relationship unfair, particularly when compared to the 55% commission in the Johnson case. The Supplier did not owe a fiduciary duty to Mr and Mrs H when acting as credit broker. The lending decision was responsible given the loan repayments represented only 4% of declared income and Mr and Mrs H had a good repayment history.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website