Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the Consumer Credit Act 1974; alleged breach of Timeshare Regulations Regulation 14(3); undisclosed commission arrangement complaint against Mitsubishi HC Capital UK Plc

Decision detail

Summary

Mr P purchased Fractional Club timeshare membership in September 2018 for £16,949, financed by a £21,113 loan from Mitsubishi HC Capital UK Plc. The membership included a share in an allocated property's net sale proceeds. After the supplier entered liquidation in December 2020, Mr P complained that the lender acted unfairly by rejecting his Section 75 claims for misrepresentation and breach of contract, and by participating in an unfair credit relationship under Section 140A. The ombudsman found no actionable misrepresentation as the contractual documentation made no profit promises, and Mr P's testimony indicated his primary motivation was family holidays rather than investment returns. Although the ombudsman acknowledged possible regulatory breaches by the supplier (marketing as investment and undisclosed commission of £844.52), these did not render the credit relationship unfair given the modest commission level and Mr P's demonstrated motivation. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to assess fairness under Section 140A of the Consumer Credit Act 1974, considering the supplier's commercial conduct, information provision, evidence of what was said at sale, inherent probabilities, and any existing unfairness. While acknowledging competing evidence that the supplier may have breached Regulation 14(3) by marketing the product as an investment, the ombudsman found this was not determinative because Mr P's own testimony indicated his primary motivation was taking regular family holidays, not achieving financial gain. The ombudsman rejected misrepresentation claims as the contractual paperwork made no promises of profit, and Mr P provided insufficient evidence of false statements of existing fact. Regarding commission, the ombudsman distinguished this case from the Supreme Court's Johnson decision, finding the commission level (3.71% of charge for credit) was not high enough to render the relationship unfair, and Mr P would have proceeded with the loan regardless of disclosure given his desire for the product.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website