Not upheld: unfair credit relationship under section 140A CCA; section 75 CCA claim; alleged misrepresentation; alleged breach of Regulation 14(3) Timeshare Regulations; undisclosed commission complaint against Mitsubishi HC Capital UK Plc trading as Novuna

Decision detail

Summary

Mr H purchased Fractional Club timeshare membership in January 2013 for £8,999 financed through a credit agreement with Novuna. The product included holiday rights and a share in net sale proceeds of an allocated property. In March 2018, Mr H's professional representative complained that the supplier had misrepresented the product as an investment, that the credit relationship was unfair under section 140A, and that the lender should have rejected the section 75 claim. The ombudsman found no actionable misrepresentation, as statements about investment potential were either true or honestly held opinions. The ombudsman concluded the credit relationship was not unfair because Mr H's purchase was not motivated by investment prospects, the undisclosed commission was modest at 5.48% of the credit charge, and Mr H had sufficient information to understand the cost of credit. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to section 140A, finding that regulatory breaches do not automatically create unfairness. The key finding was that Mr H's purchase was not motivated by the prospect of financial gain from the allocated property, as evidenced by: (1) the absence of any allegation regarding investment motivation in the original letter of complaint; (2) Mr H's unpersuasive statement on the matter; (3) the inherent probabilities of the sale; and (4) Mr H's demonstrated ability to exit previous agreements. The ombudsman rejected the section 75 claim as there was no actionable misrepresentation—statements about investment potential were either true or honestly held opinions. The commission arrangement, while undisclosed, was modest (5.48% of charge for credit) compared to the 55% in the Supreme Court's Johnson case, and Mr H had the information needed to understand the cost of credit. The ombudsman found no fiduciary duty owed by the supplier when acting as credit broker, and no evidence that the supplier and lender were improperly tied together in a way that affected the interest rate.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website