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

Decision detail

Summary

Mr and Miss J purchased Fractional Club timeshare membership for £6,978 in May 2017, financed through a credit agreement with Shawbrook Bank Limited. The membership included a share in an allocated property's net sale proceeds. They complained that the supplier misrepresented the product as an investment in breach of Regulation 14(3) of the Timeshare Regulations, that the lender failed to conduct proper affordability checks, and that an undisclosed commission of £348.90 was paid to the supplier. The ombudsman found no actionable misrepresentation under section 75 because describing the membership as an investment was not untrue given the property share element. Regarding section 140A, the ombudsman concluded the credit relationship was not unfair because Mr and Miss J's purchase was motivated by holiday rights rather than investment returns, the commission was low at 5% of the loan amount, and they had sufficient information about the credit cost. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no actionable misrepresentation by the supplier under section 75 because: (1) describing the membership as an investment was not untrue given the property share element; (2) there was insufficient evidence of false statements regarding guaranteed end dates, exclusivity, or being the only way to exit existing membership. Regarding section 140A, the ombudsman concluded the credit relationship was not unfair because: (1) the lending was affordable; (2) there was insufficient evidence of pressure preventing free choice; (3) even if the supplier breached Regulation 14(3) by marketing as an investment, Mr and Miss J's purchase was motivated by holiday rights, not investment returns; (4) the commission was low (5%) compared to the 55% in the Johnson case, and Mr and Miss J had information about the credit cost; (5) the supplier did not owe a fiduciary duty to Mr and Miss J; (6) regulatory breaches do not automatically render a credit relationship unfair under section 140A.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website