Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the Consumer Credit Act 1974; alleged breach of Timeshare Regulations 2010 (Regulation 14(3)); undisclosed commission arrangement complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs S purchased Fractional Club timeshare membership for £13,495 financed by Shawbrook Bank Limited and later complained that the supplier misrepresented the product as an investment, breached contract regarding holiday availability, and that the lender participated in an unfair credit relationship. The ombudsman found no factual misrepresentation because the product genuinely included a property share (an investment element), and the complainants' own testimony indicated they were motivated by affordability rather than profit potential. Although the ombudsman acknowledged the supplier may have breached the Timeshare Regulations prohibition on marketing timeshares as investments, this breach did not render the credit relationship unfair because the complainants would have proceeded regardless. The undisclosed commission of £674.75 (5% of borrowing) was found immaterial compared to the Supreme Court's Johnson precedent, and would not have changed the purchasing decision. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to assess fairness under Section 140A, considering: (1) whether representations about investment potential were factually untrue (found they were not); (2) whether the prospect of financial gain motivated the purchase (found it was not the primary motivating factor based on complainants' own testimony emphasizing affordability); (3) whether regulatory breaches automatically create unfairness (found they do not under case law); (4) whether the commission arrangement was material (found it was only 5% of borrowing, significantly lower than the 55% in the Supreme Court's Johnson case, and would not have changed the purchasing decision); (5) whether information failures about ongoing costs would have changed the decision (found no evidence they would have). The ombudsman concluded that even if regulatory breaches occurred, they did not render the credit relationship unfair given the complainants' actual motivations and the low materiality of the commission.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website