Not upheld: unfair credit relationship under section 140A CCA; section 75 CCA liability; alleged breach of Regulation 14(3) Timeshare Regulations; undisclosed commission; unfair contract terms complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs L complained that Shawbrook Bank Limited acted unfairly by being party to an unfair credit relationship and by rejecting a section 75 claim regarding their 2014 purchase of Fractional Club timeshare membership for £9,021. The complainants alleged the product was misrepresented as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that inadequate affordability checks were conducted, that they were pressured into the purchase, and that commission paid to the supplier was undisclosed. The ombudsman found no actionable misrepresentation, determined that Mr and Mrs L's primary motivation was holiday entitlement (not investment returns) based on their subsequent behaviour of allowing membership to lapse and later requesting reinstatement for holiday purposes, found the commission modest at 10% of the loan amount, and concluded the credit relationship was not unfair under section 140A when all circumstances were considered holistically. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A, finding that regulatory breaches do not automatically create unfairness. The key reasoning was: (1) no actionable misrepresentation was proven regarding the investment nature of the product; (2) even if Regulation 14(3) was breached, Mr and Mrs L's primary motivation was holiday entitlement, not investment returns, as evidenced by their allowing the membership to lapse and later requesting reinstatement for holiday purposes; (3) the commission of £902.10 was modest (10% of loan, 5.42% of credit charge) compared to the 55% in the Johnson case, and Mr and Mrs L had no alternative means to fund the purchase they wanted; (4) Mr and Mrs L were provided with pricing information and could understand the cost of the credit agreement; (5) the supplier did not owe a fiduciary duty when acting as credit broker; (6) the ombudsman applied the causation principle from Carney and Kerrigan, finding that Mr and Mrs L would have proceeded with the purchase regardless of any regulatory breach.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website