Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; potential breach of Regulation 14(3) of the Timeshare Regulations 2010 (marketing timeshare as investment); undisclosed commission; alleged inadequate affordability checks; alleged unauthorised credit broker arrangement complaint against Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance

Decision detail

Summary

Mr D purchased Fractional Club timeshare membership on two occasions (April 2017 and December 2017) financed through credit agreements with Novuna Personal Finance. He complained that the Lender was party to an unfair credit relationship under Section 140A of the CCA, alleging that the Supplier breached Regulation 14(3) by marketing the membership as an investment, that inadequate affordability checks were conducted, that an unauthorised credit broker arranged the agreement, that he was pressured into purchasing, and that commission was undisclosed. The ombudsman found that while a breach of Regulation 14(3) was possible, Mr D's testimony claiming investment was a motivating factor was unreliable due to potential influence from a similar upheld case and similarities to templated complaints from his representative. The ombudsman concluded that Mr D would have proceeded with the purchase regardless of any breach, as the evidence suggested holiday entitlement was his primary motivation. The commission was found to be low (3.71% of charge for credit) and would not have deterred borrowing. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 140A of the CCA, which requires consideration of whether a credit relationship was unfair to the debtor. Although the ombudsman found it possible that the Supplier breached Regulation 14(3) by marketing Fractional Club membership as an investment, regulatory breaches do not automatically create unfairness under Section 140A. The key issue was whether the breach materially influenced Mr D's decision to purchase. The ombudsman found Mr D's testimony unreliable because: (1) it was submitted after the Shawbrook & BPF v FOS judgment which upheld a similar complaint; (2) the PR had asserted Mr D's case was 'identical' to that judgment; (3) the testimony contained phrases and phrasing similar to other templated complaints from the same PR; (4) the focus on investment seemed disproportionate given the product's primary purpose was holiday entitlement. The ombudsman concluded that even if a breach occurred, Mr D would have proceeded with the purchase regardless, as the evidence suggested holiday entitlement was the primary motivation. Regarding commission, the ombudsman applied the Supreme Court's Hopcraft, Johnson and Wrench principles and found the commission was low (3.71% of charge for credit), properly calculated, and would not have deterred Mr D from borrowing for a timeshare he wanted. No fiduciary duty was owed by the Supplier when acting as credit broker.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website