Not upheld: unfair credit relationship under section 140A CCA; section 75 claim rejection; alleged breach of Timeshare Regulations; undisclosed commission; inadequate affordability checks complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs H purchased a Fractional Club timeshare membership for £41,945 in October 2014, financing £10,945 through Shawbrook Bank Limited. They complained in July 2018 that the lender acted unfairly by being party to an unfair credit relationship and by rejecting their section 75 claim. The complaint alleged the supplier breached Timeshare Regulations by marketing the product as an investment, that affordability checks were inadequate, and that commission payments were undisclosed. The ombudsman found the section 75 claim failed because the cash price exceeded £30,000. On the section 140A unfair relationship claim, the ombudsman concluded that even if regulatory breaches occurred, they were not material to Mr and Mrs H's decision to purchase, which was primarily motivated by additional holiday entitlement points based on their purchase history. The modest commission (5.43% of credit charge) would not have deterred the purchase. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A analysis, considering that regulatory breaches do not automatically render a credit relationship unfair. The key finding was that even if the supplier breached Regulation 14(3) by marketing the timeshare as an investment, this was not a material factor in Mr and Mrs H's decision to purchase, as their primary motivation appeared to be additional holiday entitlement points based on their purchase history. The commission arrangement, while potentially undisclosed, was modest at 5.43% of the charge for credit (compared to 55% in the Johnson case) and would not have deterred the purchase. The lender's affordability checks, if deficient, did not result in unaffordable lending as Mr and Mrs H had funds to repay immediately. The section 75 claim failed on the technical ground that the cash price exceeded £30,000.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website