Not upheld: unfair credit relationship under section 140A of the Consumer Credit Act 1974; section 75 claim for misrepresentation and breach of contract; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission payment complaint against Mitsubishi HC Capital UK Plc trading as Novuna Personal Finance

Decision detail

Summary

Mr M purchased fractional club timeshare membership in May 2012 for £5,604, financed by a £6,801 loan from the lender. Over six years later, in July 2018, Mr M's professional representative complained that the supplier had misrepresented the product and that the lender had participated in an unfair credit relationship, citing alleged breaches of timeshare regulations and undisclosed commission payments. The ombudsman found no actionable misrepresentation, as the evidence did not support false statements of existing fact about the product's guaranteed end date, exclusivity, or investment nature. Even assuming a breach of the prohibition on marketing timeshares as investments, the ombudsman found this was not causative of Mr M's purchase, as the evidence indicated he was motivated by a desire to exit his existing membership rather than by prospect of financial gain. The commission of £697.10 was modest and Mr M had full information about the cost of credit, so the ombudsman concluded the credit relationship was not unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A of the Consumer Credit Act 1974, considering whether the credit relationship was unfair in all the circumstances. The ombudsman found: (1) no actionable misrepresentation by the supplier regarding the guaranteed end date, exclusivity, or investment nature of the product, as the evidence did not support false statements of existing fact; (2) even if the supplier breached Regulation 14(3) by marketing the timeshare as an investment, this was not causative of Mr M's purchase decision, as the evidence indicated he was motivated by a desire to exit his existing membership rather than by prospect of financial gain; (3) the commission of £697.10 was modest (5.61% of charge for credit) compared to the 55% in the Supreme Court's Johnson case, and Mr M had full information about the cost of the credit agreement, so disclosure of commission would not have changed his decision; (4) the supplier did not owe Mr M a fiduciary duty when acting as credit broker, so remedies for secret commission were unavailable; (5) Mr M's testimony was given too late and was unreliable due to the passage of time and potential influence from recent case law; (6) regulatory breaches do not automatically render a credit relationship unfair under section 140A—the impact must be considered in the round.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website