Not upheld: unfair credit relationship; alleged breach of Timeshare Regulations Regulation 14(3); irresponsible lending; unauthorised credit broker arrangement; undisclosed commission; inadequate information provision complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs B purchased Fractional Club timeshare membership for £20,594 in March 2019, financed by Shawbrook Bank Limited. They subsequently complained that the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974, alleging multiple breaches including: marketing the product as an investment in breach of Timeshare Regulations Regulation 14(3); inadequate affordability checks; unauthorised credit broker arrangement; sales pressure; unfair contract terms; and undisclosed commission. The ombudsman's provisional decision, which the Lender accepted, rejected all grounds of complaint. The ombudsman found that while a breach of Regulation 14(3) was possible, Mr and Mrs B's testimony regarding motivation was unreliable due to templated language and post-judgment submission timing, and the evidence indicated holiday entitlement rather than investment prospects drove their purchase decision. The ombudsman concluded that regulatory breaches do not automatically create unfairness under Section 140A and that no material loss or unfairness was demonstrated. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic analysis under Section 140A, examining whether the credit relationship was unfair considering: (1) the Supplier's sales practices and whether Fractional Club was marketed as an investment in breach of Regulation 14(3) of the Timeshare Regulations; (2) whether Mr and Mrs B's purchase decision was motivated by the investment element; (3) the reliability of their testimony, which contained templated language similar to other complaints and was submitted after relevant case law was decided, creating risk of influence; (4) the adequacy of affordability checks and whether lending was unaffordable; (5) the unauthorised broker issue and whether it caused financial loss; (6) alleged sales pressure, noting the 14-day cooling-off period was not exercised; (7) unfair contract terms and their practical application; (8) information provision regarding ongoing costs; and (9) commission arrangements, applying principles from Hopcraft, Johnson and Wrench. The ombudsman concluded that even if regulatory breaches occurred, they did not render the credit relationship unfair because: the evidence did not establish that the investment prospect was a material motivating factor in the purchase decision; the lending was not unaffordable; no financial loss resulted from any procedural failures; and the Supplier did not owe a fiduciary duty to Mr and Mrs B.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website