Not upheld: undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs W borrowed £15,979 from Shawbrook in May 2012 to purchase a Fractional Club membership (timeshare) through a Supplier, with the loan repaid in full by September 2016. In November 2023, they complained that the point-of-sale paperwork failed to disclose commission paid by Shawbrook to the Supplier. The ombudsman found that while Shawbrook and the Supplier may have breached regulatory disclosure rules, the Supplier did not owe Mr and Mrs W a fiduciary duty, meaning legal remedies for secret commission were unavailable. Additionally, given the modest commission amount (10.25% of borrowed funds) and Mr and Mrs W's clear desire for the membership with no alternative funding source, the ombudsman concluded they would have proceeded with the loan regardless of commission disclosure, and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's recent judgment in Hopcraft, Johnson and Wrench, which established that commission payments made by lenders to intermediaries are legal where the intermediary does not owe a fiduciary duty to the consumer. The ombudsman found the Supplier did not owe Mr and Mrs W a fiduciary duty, meaning remedies for secret commission were not available. Additionally, even if there were regulatory breaches in disclosure, the ombudsman found that given the modest commission amount (10.25% of borrowed amount, 5.6% of credit charge) and Mr and Mrs W's clear desire for the membership with no alternative funding source, they would have proceeded with the loan regardless of commission disclosure.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website