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; undisclosed commission arrangements complaint against Mitsubishi HC Capital UK PLC (trading as Novuna)

Decision detail

Summary

Mr T purchased a Fractional Club timeshare membership in January 2015 for £9,571, financed through a credit agreement with Novuna. The membership included a share in an allocated property's net sale proceeds. In June 2018, Mr T complained that the supplier had misrepresented the product as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that there was a breach of contract regarding holiday availability, and that the lender was party to an unfair credit relationship. The lender rejected all claims. The ombudsman found no actionable misrepresentation or breach of contract, and concluded that even if the supplier had breached Regulation 14(3), the credit relationship was not unfair because Mr T's purchase was not motivated by investment prospects. The ombudsman questioned the credibility of Mr T's undated statement and found the commission arrangement (5.34% of charge for credit) was modest and properly disclosed through the credit agreement terms.

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 T's purchase was not motivated by the prospect of financial gain from the allocated property, even if the supplier had breached Regulation 14(3) by marketing the product as an investment. The ombudsman found Mr T's motivations were unclear and his undated statement was potentially unreliable, having possibly been written after the Shawbrook judgment. The commission was relatively modest (5.34% of charge for credit) compared to the 55% in the Johnson case, and Mr T had full information about the cost of the credit agreement. The ombudsman concluded that even with alleged regulatory failures, Mr T would have proceeded with the purchase.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website