Not upheld: Irresponsible lending complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs P purchased Fractional Club timeshare membership on two occasions (March and October 2014) financed by Shawbrook through two credit agreements. They complained in May 2022 alleging the Supplier made misrepresentations about the investment potential, guaranteed end date, and holiday access of the membership, and that Shawbrook participated in an unfair credit relationship by failing to conduct proper affordability checks, failing to disclose commission, and being party to misleading sales practices. The ombudsman found the Section 75 misrepresentation claims were time-barred under the Limitation Act 1980 as the complaint was made more than six years after the times of sale. Regarding the Section 140A unfairness claim, the ombudsman found no credible evidence that investment potential was a material factor in the purchase decision, that the commission arrangement was not sufficiently high or improperly disclosed to render the relationship unfair, and that Mr and Mrs P failed to provide direct testimony to support their allegations. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the Limitation Act 1980, finding that Section 75 claims for misrepresentation must be brought within six years of the cause of action accruing (the times of sale). Since Mr and Mrs P did not notify Shawbrook of their claims until 20 May 2022, more than six years had passed, giving Shawbrook a defence. Regarding Section 140A unfairness, the ombudsman found no credible evidence that the prospect of financial gain from the allocated property was a material motivating factor in the purchase decision, particularly given the absence of direct testimony from Mr and Mrs P. The ombudsman applied the Supreme Court's guidance in Hopcraft, Johnson and Wrench on commission arrangements, finding that the commission here (5.43% of charge for credit) was not high enough to render the relationship unfair, especially given Mr and Mrs P's desire for the product and lack of alternative means to pay. Regulatory breaches do not automatically create unfairness under Section 140A; they must be considered in the round with regard to causation and materiality.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website