Not upheld: Goods and services under S75 complaint against Mitsubishi HC Capital UK Plc

Decision detail

Summary

Mr R purchased Fractional Club timeshare membership for £12,898 in October 2018, financed by a £15,233 credit agreement from Mitsubishi HC Capital UK Plc. In June 2023, through his professional representative, Mr R complained that the lender acted unfairly by rejecting his Section 75 claims for misrepresentation and breach of contract, and by being party to an unfair credit relationship under Section 140A of the Consumer Credit Act 1974. The complaint alleged the supplier misrepresented the membership as an investment, breached the contract regarding holiday availability, breached Regulation 14(3) of the Timeshare Regulations by marketing it as an investment, and that the lender failed to disclose a commission arrangement. An investigator upheld the complaint, but the lender disagreed. The ombudsman, after issuing a provisional decision and considering further submissions, found no actionable misrepresentation or breach of contract, and concluded that even if the supplier breached Regulation 14(3), this did not render the credit relationship unfair because Mr R's purchase was not motivated by the prospect of financial gain. The ombudsman also found the undisclosed commission was too small to render the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A of the Consumer Credit Act 1974, finding that regulatory breaches do not automatically render a credit relationship unfair. The key reasoning was: (1) regarding misrepresentation claims under Section 75, the statements about investment and financial returns were not factually untrue as the share in the property did constitute an investment; (2) regarding breach of contract, there was insufficient evidence that the supplier breached the Purchase Agreement regarding holiday availability; (3) regarding the alleged breach of Regulation 14(3) prohibiting marketing timeshares as investments, even if such a breach occurred, it did not render the credit relationship unfair because Mr R's purchase was not motivated by the prospect of financial gain - his statement did not demonstrate that the investment element was a motivating factor; (4) regarding commission disclosure, the amount was low (3.71% of charge for credit) compared to the Supreme Court's guidance in Johnson, and Mr R was provided with sufficient pricing information to understand the cost of the credit agreement; (5) the supplier was not acting as Mr R's agent and did not owe him a fiduciary duty; (6) Mr R has not persuaded the ombudsman that he would have made a different purchasing decision had there been fuller disclosure or absence of any regulatory breach.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website