Not upheld: Section 75 Consumer Credit Act claim; Section 140A unfair credit relationship; alleged mis-selling of timeshare as investment; undisclosed commission; breach of contract; misrepresentation complaint against Shawbrook Bank Limited

Decision detail

Summary

Mrs H and Mr H purchased a timeshare membership with an associated loan from Shawbrook Bank in July 2018, arranged by the timeshare Supplier. In December 2023, they complained that the Supplier had mis-sold the timeshare as an investment and that the Lender had participated in an unfair credit relationship by failing to disclose a commission payment to the Supplier. An Investigator upheld the complaint, but the Lender disagreed. The Ombudsman found that Section 75 of the Consumer Credit Act did not apply as the purchase price exceeded £30,000, that Mrs H and Mr H's own witness statement indicated they did not expect financial profit from the investment aspect (only partial capital return), and that the 5% commission was not inherently unfair or concealed in a manner that rendered the credit relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Supreme Court's definition of 'investment' from Hopcraft, Johnson and Wrench as 'a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit'. Based on Mrs H and Mr H's witness statement, they understood the investment aspect to mean receiving 'a percentage back' of the property value, not a profit. This indicated they did not expect financial gain, so the Supplier likely did not market it as an investment in breach of Regulation 14(3). Regarding commission, the ombudsman found the 5% rate (4.63% of charge for credit) was not 'so high' as to be inherently unfair, unlike the 55% commission in Mr Johnson's case. The ombudsman found no evidence of concealment of a commercial tie, no evidence the commission arrangement gave the Supplier discretion over interest rates, and concluded Mrs H and Mr H would have taken the loan regardless of commission disclosure. Regulatory breaches do not automatically create unfairness under Section 140A; they must be considered in the round with their consequences.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website