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; potential breach of Timeshare Regulations complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs M purchased a Fractional Club timeshare membership for £16,146 in February 2017, financed by Shawbrook Bank Limited. In March 2023, they complained that the lender acted unfairly by declining their Section 75 claims (alleging supplier misrepresentation and breach of contract) and by being party to an unfair credit relationship under Section 140A. The ombudsman found the Section 75 claims time-barred under the Limitation Act 1980. Regarding Section 140A, the ombudsman conducted a comprehensive analysis of the credit relationship, considering potential breaches of the Timeshare Regulations, information disclosure failures, and commission arrangements. The ombudsman concluded that even if regulatory breaches occurred, they did not render the relationship unfair because Mr and Mrs M's purchase was motivated by holiday benefits rather than financial gain from the property share, meaning any breach would not have been material to their decision. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A analysis, considering whether any regulatory breaches (such as potential breach of Regulation 14(3) regarding marketing as an investment) rendered the credit relationship unfair. The key finding was that even if the supplier breached regulations, Mr and Mrs M's own testimony showed their purchase was motivated by holiday benefits, not financial gain from the property share. Therefore, any breach would not have been material to their decision. The ombudsman also found Section 75 claims time-barred under the Limitation Act 1980, as more than six years had elapsed since the cause of action arose on 15 February 2017. The ombudsman rejected arguments about undisclosed commission (distinguishing the Supreme Court's Hopcraft/Johnson/Wrench decision on the basis that no commission was actually paid at the time of sale) and insufficient information disclosure, finding these did not render the relationship unfair given Mr and Mrs M's actual motivations.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website