Not upheld: Goods and services under S75 complaint against Mitsubishi HC Capital UK Plc (trading as Novuna Personal Finance)

Decision detail

Summary

Mr H purchased a Fractional Club timeshare membership for £15,430 in July 2018, financed through a credit agreement with the lender. He later complained that the supplier misrepresented the product as an investment, breached contract by not securing holiday accommodation, and that the lender participated in an unfair credit relationship. The ombudsman rejected all grounds: no actionable misrepresentation was found because the investment element was factually true; no breach of contract was established as Mr H successfully used his membership for holidays; and while a possible breach of Timeshare Regulations (marketing as investment) was acknowledged, it did not render the credit relationship unfair because Mr H's purchase was primarily motivated by holiday benefits, not financial gain. The undisclosed commission of £617.20 (4% of borrowing) was found insufficient to create unfairness given the transparency of credit costs and the low proportion of the charge for credit.

The Ombudsman's reasoning

The ombudsman applied a multi-factor test under Section 140A of the Consumer Credit Act 1974, examining: (1) the supplier's commercial conduct and sales practices; (2) information provision at point of sale; (3) evidence of what was said/done; (4) inherent probabilities; and (5) any existing unfairness. On Section 75 claims, the ombudsman found no actionable misrepresentation because the statement that membership was an investment was factually true (it included a share in a property). Regarding breach of contract, there was insufficient evidence that the supplier failed to provide holiday accommodation as promised. On the alleged breach of Regulation 14(3) of the Timeshare Regulations (prohibition on marketing timeshares as investments), while the ombudsman acknowledged it was possible such a breach occurred, it was not determinative because Mr H's evidence showed his purchase was motivated primarily by holiday benefits, not financial gain. The ombudsman applied the Supreme Court's reasoning in Hopcraft, Johnson and Wrench, finding the commission (4% of borrowing) was not 'so high' as to render the relationship unfair, particularly given Mr H had full transparency on the cost of credit and could compare alternatives. The ombudsman rejected arguments about unfair contract terms, finding no evidence they were operated unfairly in practice or that Mr H would have made a different decision with fuller information.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website