Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; section 75 claim for misrepresentation; undisclosed commission; alleged breach of Timeshare Regulations Regulation 14(3) complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs P purchased Fractional Club timeshare membership for £9,721 financed by Shawbrook Bank Limited in October 2014. They later complained that the product was misrepresented as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974, and that commission paid by the Lender to the Supplier was undisclosed. The ombudsman found no actionable misrepresentation under Section 75, as the investment element (share in property proceeds) was genuine. Although the Supplier may have breached Regulation 14(3), the ombudsman found Mr and Mrs P's purchase was motivated by holiday entitlement, not investment prospects, so any breach did not render the credit relationship unfair. The undisclosed commission of £972.10 (10% of amount borrowed) was not so high as to create unfairness. The ombudsman rejected Mr and Mrs P's later testimony about investment motivation as lacking credibility due to its timing (3.5 years after complaint, after relevant court judgment) and lack of specificity to this particular sale. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A, considering whether regulatory breaches (potential breach of Regulation 14(3) prohibiting marketing timeshares as investments) rendered the credit relationship unfair. The key finding was that even if the Supplier breached Regulation 14(3), Mr and Mrs P's purchase was not motivated by investment considerations but by holiday entitlement. The ombudsman found Mr and Mrs P's later testimony about investment motivation lacked credibility due to timing (provided 3.5 years after complaint, after relevant court judgment) and lack of specificity to this particular sale. The commission arrangement at 10% was not so high as to create unfairness, contrasting sharply with the 55% commission in the Supreme Court's Johnson case. The ombudsman concluded that regulatory breaches do not automatically create unfairness under Section 140A; the impact on the complainant must be considered in the round.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website