Not upheld: unfair credit relationship (Section 140A CCA), connected lender liability (Section 75 CCA), misrepresentation, breach of Timeshare Regulations, undisclosed commission complaint against Mitsubishi HC Capital UK Plc

Decision detail

Summary

Mr M purchased Fractional Club timeshare membership for £6,180 in April 2018, financed through a credit agreement with Mitsubishi HC Capital UK Plc. The membership provided only a 1% increase in holiday points but included a share in an Allocated Property's net sale proceeds. Mr M complained through a professional representative in June 2021, alleging the supplier misrepresented the product as an investment in breach of Timeshare Regulations, that the lender failed to conduct proper affordability checks, and that undisclosed commission arrangements rendered the credit relationship unfair. An investigator upheld the complaint, but the ombudsman found that while the supplier may have marketed the product as an investment, Mr M's primary motivation was the shorter membership term (13 years versus 36 more years), not profit expectations. The ombudsman concluded the credit relationship was not unfair under Section 140A of the Consumer Credit Act, the lender was not liable under Section 75, and no remedy was warranted.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A unfairness, considering regulatory breaches do not automatically create unfairness. On Section 75 misrepresentation claims, the ombudsman found that while Fractional Club membership included an investment element (share in property), this was not an actionable misrepresentation as it was factually accurate and the prospect of financial gain was not Mr M's primary motivation for purchase. Regarding the alleged breach of Regulation 14(3) (prohibition on marketing timeshares as investments), the ombudsman found competing evidence but concluded that even if a breach occurred, Mr M's decision was motivated primarily by the shorter membership term (approximately 13 years versus 36 more years for his existing membership) and the prospect of receiving money back when the property was sold, not by expectations of profit. On commission disclosure, the ombudsman distinguished this case from the Supreme Court's Hopcraft/Johnson/Wrench precedent, finding the commission (£247.20 or 4% of amount borrowed) was not high enough to render the relationship unfair, the supplier was not acting as Mr M's agent but as seller of timeshare rights, and Mr M would have proceeded with the purchase regardless of disclosure given his desire for the product and lack of alternative means to pay.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website