Not upheld: Other regulated complaint complaint against Clydesdale Financial Services Limited

Decision detail

Summary

Mr M and Mrs M purchased Fractional Club timeshare membership in April 2017 for £19,520, financed by a loan from Clydesdale Financial Services Limited. The membership included a share in net sale proceeds of an allocated property. Mr M repaid the loan in September 2017 but did not raise complaints until June 2023, over six years later. He claimed the lender was liable under Section 75 of the Consumer Credit Act 1974 for the supplier's alleged misrepresentations and breach of contract, and that the credit relationship was unfair under Section 140A due to the supplier's alleged breach of Regulation 14(3) of the Timeshare Regulations (marketing as an investment) and undisclosed commission. The ombudsman found the Section 75 claims were time-barred under the Limitation Act 1980. On the Section 140A claim, the ombudsman found that even if the supplier breached Regulation 14(3), this did not render the credit relationship unfair because Mr M's own evidence showed he was motivated by the prospect of recouping costs for holidays rather than by expectation of profit. The undisclosed commission of 2.5% was not so high as to create unfairness. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a multi-layered analysis. First, on Section 75 claims, the ombudsman found that as more than six years had passed between the Time of Sale and when Mr M first notified the lender of his claims, the claims were time-barred under the Limitation Act 1980, and it was reasonable for the lender to reject them. Second, on the unfair credit relationship claim under Section 140A, the ombudsman examined whether the supplier's possible breach of Regulation 14(3) of the Timeshare Regulations (marketing/selling as an investment) rendered the credit relationship unfair. The ombudsman found that even if such a breach occurred, it was not causative of Mr M's decision to purchase because Mr M's own evidence showed he was motivated by the prospect of recouping 'a portion' of his investment to cover holidays, not by expectation of a profit. The ombudsman applied principles from Carney and Kerrigan establishing that causation is relevant to Section 140A analysis. Third, on commission disclosure, the ombudsman distinguished the case from Hopcraft, Johnson and Wrench on the basis that the commission was only 2.5% (compared to 55% in that case), Mr M had full information about the cost of credit, and there was no evidence of a fiduciary duty owed by the supplier to Mr M. The ombudsman concluded that regulatory breaches do not automatically create unfairness under Section 140A and must be considered in the round.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website