Not upheld: unfair credit relationship under Section 140A CCA; misrepresentation under Section 75 CCA; undisclosed commission; alleged breach of Timeshare Regulations complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs H purchased Fractional Club timeshare membership for £7,500 in January 2015, financed by Shawbrook Bank Limited. Over two years later, they complained that the supplier misrepresented the product as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that the lender failed to conduct proper affordability checks, and that an undisclosed £75 commission created an unfair credit relationship. The ombudsman found that the Letter of Complaint, sent close to the time of sale, indicated their primary motivations were the shorter 15-year membership term and management fee savings, not investment profit. Even assuming a breach of the Timeshare Regulations, this would not have materially affected their decision. The commission was too small (1% of borrowing) to render the relationship unfair, and the supplier owed no fiduciary duty. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A analysis, considering whether regulatory breaches automatically created unfairness. The key finding was that Mr and Mrs H's primary motivation for purchase was the shorter 15-year membership term and management fee savings, not investment profit, as evidenced by their Letter of Complaint sent close in time to the sale. Even if the supplier breached Regulation 14(3) by marketing as an investment, this breach would not have been material to their purchasing decision. The commission of £75 (1% of borrowing) was not high enough to render the relationship unfair, particularly when compared to the 55% commission in the Johnson case. The ombudsman found no fiduciary duty owed by the supplier when acting as credit broker, and no evidence of concealment of the commercial tie between lender and supplier.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website