Not upheld: unfair credit relationship; potential breach of Regulation 14(3) of the Timeshare Regulations (marketing timeshare as investment); alleged irresponsible lending; undisclosed lender-supplier relationship; failure to conduct affordability checks; alleged high-pressure sales tactics complaint against First Holiday Finance Ltd

Decision detail

Summary

Mr R and Mrs C complained that First Holiday Finance Ltd was party to an unfair credit relationship when it financed their purchase of Fractional Club timeshare membership on three occasions between 2017 and 2018. They alleged multiple breaches including: marketing the timeshare as an investment in breach of Regulation 14(3) of the Timeshare Regulations; failure to conduct proper affordability checks despite their being in a Debt Management Plan; lending through an unauthorized broker; and failing to disclose the close commercial relationship between the Lender and Supplier. The ombudsman found that while a breach of Regulation 14(3) was possible, Mr R and Mrs C's testimony about being motivated by investment returns was unreliable due to the five-year delay before complaint, potential influence from knowledge of similar cases, and inconsistencies in their account. The ombudsman concluded that even if a breach had occurred, Mr R and Mrs C would likely have proceeded with the purchases regardless, as their primary motivation appeared to be holiday entitlement. Accordingly, the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 140A of the Consumer Credit Act 1974, which allows for relief if a credit relationship is unfair to the debtor. The ombudsman examined whether the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing the Fractional Club as an investment. While acknowledging that such a breach was possible, the ombudsman found that regulatory breaches do not automatically create unfairness under Section 140A; the impact on the complainant must be considered. Crucially, the ombudsman found that Mr R and Mrs C's testimony about being motivated by investment returns was unreliable due to: (1) the five-year gap between the sale and complaint, creating risk of false recollection; (2) potential influence from knowledge of similar FOS determinations and discussions with others; (3) inconsistencies in their account (e.g., claiming they didn't want the purchase yet making multiple purchases); and (4) the surprising emphasis on investment when the product's core purpose was holiday entitlement, which they obtained significant benefits from. The ombudsman concluded that even if a breach occurred, Mr R and Mrs C would likely have proceeded with the purchase regardless, meaning the breach was not material to their decision. The ombudsman also found no unfairness regarding affordability checks, pressure/misrepresentation, unfair contract terms, broker authorization, or commission arrangements.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website