Not upheld: mis-selling of timeshare product and alleged unfair credit relationship due to undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mrs K and Mr K complained that Shawbrook Bank Limited failed to honour a Section 75 claim and participated in an unfair credit relationship under Section 140A of the Consumer Credit Act 1974 regarding a timeshare purchase made on 11 March 2019. They alleged the Supplier misrepresented the timeshare's booking availability, exclusivity, and investment potential, and that the Lender failed to disclose a commission payment to the Supplier. The ombudsman found insufficient evidence of misrepresentation, noting the product did contain an investment element and the context of the purchase (replacing an unsuitable membership) suggested investment was not a material motivation. Although the Lender paid undisclosed commission of £342.35 (5% of the loan amount), the ombudsman applied the Supreme Court's Hopcraft, Johnson and Wrench principles and found the commission was too low and the circumstances too different from the Johnson case to render the credit relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied Section 75 and Section 140A of the Consumer Credit Act 1974, along with the Timeshare Regulations 2010. On Section 75 misrepresentation claims, the ombudsman found insufficient evidence that the Supplier made false statements about booking availability, product exclusivity, or investment potential. Regarding the investment claim, the ombudsman noted the product did contain an investment element (share in property sale proceeds), so calling it an investment would not be false. The context of the 2019 purchase—where Mrs K and Mr K were seeking to replace an unsuitable membership to better meet their family holiday needs—suggested they were not materially motivated by investment potential. The ombudsman found Mrs K and Mr K's general assertion that all products were sold as investments to be an unconvincing afterthought lacking specificity. On Section 140A unfairness, the ombudsman applied the Supreme Court's Hopcraft, Johnson and Wrench principles. Although the commission was undisclosed, at 5% of the amount borrowed it was significantly lower than the 55% commission in the Johnson case. The ombudsman found no evidence of a fiduciary duty owed by the Supplier when acting as credit broker, no contractual or commercial tie that was improperly concealed, and no evidence the commission arrangement affected the interest rate. The ombudsman concluded that even with disclosure, Mrs K and Mr K would have taken out the loan as they wanted the timeshare and had no alternative means of payment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website