Not upheld: section 75 misrepresentation claim and unfair credit relationship under section 140A of the Consumer Credit Act 1974; undisclosed commission arrangements complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs L, long-standing timeshare members, purchased fractional club points through three separate transactions between January 2013 and April 2014, funded by three credit agreements with Shawbrook Bank Limited. They later complained that the Supplier had misrepresented the fractional club membership as guaranteeing a 50% profit and having a guaranteed end date, and that the Lender was party to an unfair credit relationship due to undisclosed commission payments to the Supplier. The ombudsman found that the Purchase Agreements contained explicit disclaimers, signed by Mr and Mrs L, stating that fractional points were not a property or financial investment and that there was no guarantee of profit. The ombudsman rejected claims of misrepresentation, found the commission amounts (ranging from 1% to 8% of amounts borrowed) were not high enough to render the relationship unfair under section 140A, and found the professional representative's cost calculations implausible. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no evidence of misrepresentation by the Supplier regarding guaranteed profits or guaranteed end dates, as the Purchase Agreements contained explicit disclaimers that Mr and Mrs L signed confirming they understood there was no guarantee of profit and that property prices could fall. The ombudsman rejected the professional representative's calculations regarding affordability and overall costs as neither plausible nor persuasive, noting that actual interest costs (£3,411.23) were substantially lower than projected. Regarding the undisclosed commission, the ombudsman applied the Supreme Court's judgment in Hopcraft, Johnson and Wrench, finding that the commission amounts (8%, 8%, and 1% respectively) were not high enough to render the credit relationship unfair, particularly given that Mr and Mrs L had information about the price of membership and cost of credit, and would likely have proceeded with the loans regardless of commission disclosure. The ombudsman found no fiduciary duty owed by the Supplier to Mr and Mrs L when acting as credit broker, and no evidence of a contractual or commercial tie that was improperly concealed.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website