Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; section 75 claims for misrepresentation and breach of contract; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission arrangements complaint against Mitsubishi HC Capital UK Plc trading as Hitachi Personal Finance

Decision detail

Summary

Mrs C purchased Fractional Club timeshare membership in 2012 for £14,799 financed by the lender, which included a share in an allocated property's net sale proceeds. In 2020, she complained that the lender acted unfairly by rejecting her section 75 claims for misrepresentation and breach of contract, and by participating in an unfair credit relationship under section 140A of the Consumer Credit Act 1974. The ombudsman found that misrepresentation claims were time-barred, there was no breach of contract as the Fractional Club continues operating, and although the supplier may have breached Regulation 14(3) by marketing the product as an investment, this did not render the credit relationship unfair because Mrs C's purchase was not motivated by investment prospects. The commission arrangement (10.25% of amount borrowed) was not high enough to create unfairness. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied section 140A of the Consumer Credit Act 1974 and considered whether the credit relationship was unfair. Key reasoning: (1) Misrepresentation claims were time-barred under the Limitation Act 1980; (2) No breach of contract by supplier as the Fractional Club continues operating; (3) While a possible breach of Regulation 14(3) existed (marketing as investment), this did not render the relationship unfair because Mrs C's purchase was not motivated by prospect of financial gain - evidenced by her later surrender of membership and inconsistencies in her recollections; (4) The commission of 10.25% was not high enough to create unfairness compared to the Supreme Court's Hopcraft case (55%); (5) Regulatory breaches do not automatically create unfairness under section 140A - they must be considered in the round with their actual impact; (6) Causation is important - if Mrs C would have proceeded regardless of any breach, the breach cannot render the relationship unfair.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website