Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability claim under Section 75 of the Consumer Credit Act 1974; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission arrangements complaint against Honeycomb Finance Limited

Decision detail

Summary

Mr A purchased a Fractional Club timeshare membership for £16,573 financed through a credit agreement with Honeycomb Finance Limited and subsequently complained that the Supplier had misrepresented the product as an investment and that the credit relationship was unfair. The ombudsman found no actionable misrepresentation under Section 75 of the Consumer Credit Act 1974 because the statements about investment potential were not false. Although the ombudsman acknowledged it was possible the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing the product as an investment, the complaint was not upheld because Mr A's purchase motivation was holiday flexibility and cost savings rather than investment returns, no commission was paid by the Lender to the Supplier, and regulatory breaches do not automatically render a credit relationship unfair under Section 140A.

The Ombudsman's reasoning

The ombudsman found no actionable misrepresentation under Section 75 because the statements about investment potential and property sale were not false statements of existing fact. Regarding Section 140A, even assuming a possible breach of Regulation 14(3), the ombudsman concluded the credit relationship was not unfair because: (1) Mr A's purchase motivation was holiday flexibility and cost savings, not investment returns; (2) no commission was paid by the Lender to the Supplier, distinguishing this from the Supreme Court's Hopcraft/Johnson case; (3) regulatory breaches do not automatically create unfairness under Section 140A; and (4) the Supplier's role as credit broker was not separate from its role as seller and did not create a fiduciary duty.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website