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 Regulation 14(3) of the Timeshare Regulations 2010; undisclosed commission arrangements complaint against Shawbrook Bank Limited

Decision detail

Summary

Mrs S and the late Mr S purchased Fractional Club timeshare membership in 2013 for £17,186 financed by Shawbrook Bank Limited. They later complained that the membership was unfairly marketed as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that the credit relationship was unfair under Section 140A of the Consumer Credit Act 1974, and that the lender was liable under Section 75 for the supplier's misrepresentations. The ombudsman found that while the supplier may have breached Regulation 14(3), this was not material to the purchasing decision as the evidence showed the consumers were primarily motivated by obtaining a shorter membership term and holiday use rather than financial gain. The Section 75 claims for misrepresentation failed because the purchase price exceeded £30,000. The commission of £1,761.57 (10.3% of the loan) was not disproportionately high and would not have deterred the purchase had it been disclosed. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic assessment of the credit relationship under Section 140A, finding that regulatory breaches do not automatically create unfairness. While acknowledging the possibility that the supplier may have breached Regulation 14(3) by marketing the membership as an investment, the ombudsman found this was not material to Mrs S and the late Mr S's purchasing decision. The evidence showed their primary motivation was obtaining a shorter membership term and holiday use, not financial gain. The commission of 10.3% was not disproportionately high compared to the Supreme Court's guidance, and the consumers would have proceeded with the purchase regardless of disclosure. The witness statements were found to be formulaic and potentially influenced by subsequent case law, limiting their evidentiary weight.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website