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

Decision detail

Summary

Mr and Mrs G purchased a Fractional Club timeshare membership in October 2015 for £11,899, financed by a £16,377 loan from Shawbrook Bank Limited. The membership included a share in an allocated property's net sale proceeds. In May 2024, more than 8 years later, Mr and Mrs G complained that the Lender acted unfairly by being party to an unfair credit relationship and by rejecting their Section 75 claims against the Supplier for misrepresentation and breach of contract. The ombudsman found that the misrepresentation claim was time-barred under the Limitation Act 1980, having been made more than 6 years after the Time of Sale. Although the Supplier may have breached Regulation 14(3) by marketing the timeshare as an investment, the ombudsman found this was not material to Mr and Mrs G's purchase decision, which was primarily motivated by holiday availability during school holidays and affordability, not investment returns. The ombudsman concluded that regulatory breaches do not automatically render a credit relationship unfair under Section 140A; they must be assessed holistically regarding their actual impact on the consumer. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic assessment of the credit relationship under Section 140A of the CCA, considering all relevant circumstances rather than treating regulatory breaches as automatically creating unfairness. The key reasoning was: (1) the Section 75 misrepresentation claim was time-barred under the Limitation Act 1980 as it was made more than 6 years after the Time of Sale; (2) even if the Supplier breached Regulation 14(3) by marketing the timeshare as an investment, this was not material to Mr and Mrs G's decision, as their primary motivation was holiday availability during school holidays, not investment returns; (3) the witness statement's reliability was questionable as it was drafted after the Shawbrook & BPF v FOS judgment, creating a risk of influence; (4) Mr and Mrs G's own testimony showed they were primarily concerned with affordability and holiday availability, agreeing to purchase only after receiving a better deal; (5) the commission arrangements did not render the relationship unfair as the Lender paid no commission at the Time of Sale and there was no evidence of a fiduciary duty owed by the Supplier; (6) regulatory breaches do not automatically create unfairness under Section 140A—they must be considered in the round with regard to their actual impact on the consumer.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website