Not upheld: misrepresentation under Section 75 of the Consumer Credit Act 1974; unfair credit relationship under Section 140A of the Consumer Credit Act 1974; alleged breach of Regulation 14(3) of the Timeshare Regulations 2010; undisclosed commission; inadequate information provision complaint against Mitsubishi HC Capital UK PLC (trading as Novuna Consumer Finance, formerly Hitachi Personal Finance)

Decision detail

Summary

Mr O and Mrs B purchased a Fractional Club timeshare membership for £14,705 in June 2018, financed by a loan of £17,888 from the lender. The membership included a share in the net proceeds of an allocated property. Mr O complained that the supplier misrepresented the product and that the lender was party to an unfair credit relationship. The lender rejected the complaint. The ombudsman found no actionable misrepresentation because the statements about investing in a property share and receiving proceeds upon sale were factually true, even if unprofitable. The ombudsman also found the credit relationship was not unfair under Section 140A, as the undisclosed commission was low (4%), the consumer had information about the cost of credit, and there was no evidence the consumer would have acted differently with fuller disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the legal test for misrepresentation (untrue statement of existing fact that induced the contract) and found no actionable misrepresentation. The ombudsman found that telling prospective members they were investing in a property share and would receive proceeds upon sale was not untrue, as the membership did offer a prospect of financial return. The ombudsman found it unlikely the supplier promised a specific profit level (1.93%), and more likely this figure related to the size of their share, not profit. Regarding Section 140A unfairness, the ombudsman considered the supplier's sales practices, information provision, and commission arrangements. The ombudsman found the commission (4% of amount borrowed) was not high enough to render the relationship unfair, especially given Mr O had information about the cost of credit and could compare options. The ombudsman applied the Supreme Court's principles from Hopcraft, Johnson and Wrench, noting that regulatory breaches do not automatically create unfairness under Section 140A, and that the impact on the complainant must be considered. The ombudsman found no evidence that Mr O would have made a different decision had the commission been disclosed.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website