Not upheld: section 75 liability for misrepresentation and breach of contract; unfair credit relationship under section 140A; undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs S complained to Shawbrook Bank Limited about two timeshare fractional club membership purchases financed by credit agreements in 2013 and 2014, claiming misrepresentation and unfair credit relationships. They raised section 75 claims and alleged the lender participated in unfair credit relationships under section 140A of the Consumer Credit Act 1974, citing alleged misrepresentations about investment potential, guaranteed end dates, and exclusivity, as well as undisclosed commission payments. The ombudsman found the first section 75 claim time-barred as it was raised more than six years after the purchase, and found no actionable misrepresentation or breach for the second purchase. The ombudsman also rejected the section 140A claim, finding the lending was affordable, Mr and Mrs S's primary motivation was holiday benefits rather than investment returns, and the undisclosed commission was low and would not have affected their decision to borrow. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that the section 75 claim for the 28 April 2013 sale was time-barred as it was first raised more than six years after the cause of action accrued, making it reasonable for the lender to reject it. For the 11 May 2014 sale, the ombudsman found no actionable misrepresentation or breach of contract by the supplier. Regarding section 140A, the ombudsman considered whether the credit relationships were unfair, examining the supplier's sales practices, information provision, potential breach of timeshare regulations, and undisclosed commission. The ombudsman concluded that: (1) the lending was affordable; (2) there was insufficient evidence of pressure or misrepresentation; (3) even if the supplier breached the prohibition on marketing timeshares as investments, Mr and Mrs S's motivation was primarily the holiday benefits, not investment potential; (4) the commission payments were low (5-10% of amounts borrowed) compared to the Supreme Court's guidance in Hopcraft, Johnson and Wrench, and Mr and Mrs S would have proceeded with the loans regardless; and (5) the supplier did not owe a fiduciary duty to Mr and Mrs S.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website