Not upheld: Goods and services under S75 complaint against Shawbrook Bank Limited

Decision detail

Summary

Mrs A and Mr R purchased Fractional Club timeshare membership for £30,961 (£8,905 after trade-in) financed by a £8,950 credit agreement from Shawbrook Bank Limited in August 2014. In July 2017, they complained that the Supplier had misrepresented the product as an investment and guaranteed exit, that no proper affordability checks were conducted, that unfair contract terms existed, that commission was undisclosed, and that they were subjected to undue pressure. The Lender rejected all complaints. The ombudsman found the purchase price exceeded the £30,000 limit for Section 75 connected lender liability claims. Although acknowledging a possible breach of Regulation 14(3) of the Timeshare Regulations (prohibition on marketing timeshares as investments), the ombudsman found this was not material to the purchasing decision because Mrs A and Mr R's own evidence demonstrated their primary motivation was to exit their existing Vacation Club membership with a defined term, not to profit from the investment element. The commission of £895 was found to be low (5.42% of charge for credit) and not disproportionate. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic assessment of the credit relationship under Section 140A, considering the Supplier's commercial conduct, information provision, evidence of what was said at sale, inherent probabilities, and commission arrangements. While acknowledging it was possible the Supplier breached Regulation 14(3) by marketing Fractional Club as an investment, the ombudsman found this was not material to the purchasing decision because Mrs A and Mr R's own evidence (Letter of Complaint and testimony) demonstrated their primary motivation was to exit the Vacation Club with a defined term, not to make a profit. The ombudsman rejected arguments that regulatory breaches automatically create unfairness, applying the principle from Plevin that such breaches must be considered in the round. The commission of £895 (5.42% of charge for credit) was found to be low and not disproportionate, distinguishing this case from Johnson where commission was 55%. The ombudsman found no fiduciary duty was owed by the Supplier when acting as credit broker, and that Mrs A and Mr R would have proceeded with the purchase regardless of commission disclosure.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website