Upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; breach of Regulation 14(3) of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010; misrepresentation in marketing and selling timeshare as investment complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs H, long-standing timeshare owners, purchased 16,500 fractional points in a Fractional Club membership on 8 July 2013 for £9,435, financed by a credit agreement with Shawbrook Bank Limited. The fractional membership was asset-backed, offering a share in the net sale proceeds of an allocated property in Tenerife. Mr and Mrs H complained that the supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and selling the membership as an investment, and that this rendered the credit relationship unfair under Section 140A of the Consumer Credit Act 1974. The ombudsman upheld the complaint, finding that Mrs H's testimony, combined with the inherent implausibility of alternative motivations and the difficulty of justifying the purchase price without reference to investment returns, established that the supplier had marketed the fractional club as an investment. The ombudsman ordered the lender to refund all credit agreement repayments, refund the difference in management charges, deduct the value of benefits received, add interest, and remove adverse credit information.

The Ombudsman's reasoning

The ombudsman found that the supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and selling the Fractional Club membership as an investment. The prohibition on marketing timeshares as investments is not limited to using the word 'investment' but extends to implying that future financial returns (profits) are a good reason to purchase. The government's consultation guidance stated there should be no inference that the cost would be recoupable at a profit. Mrs H's consistent testimony that she was told the membership offered financial returns, combined with the inherent difficulty of justifying the £9,435 price for only 500 additional holiday points without reference to the investment element, made it more likely than not that the supplier positioned the fractional club as an investment. The breach was material to Mr and Mrs H's decision to purchase, as they already held sufficient points for holidays and could have exited their existing membership by August 2028 without the fractional club. Under Section 56 of the CCA, the supplier's actions during antecedent negotiations are deemed to be actions of the lender as agent. This breach rendered the credit relationship unfair under Section 140A of the CCA, which requires consideration of the entirety of the relationship and all relevant circumstances, not merely technical breaches.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website