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

Decision detail

Summary

Mr and Mrs S purchased Fractional Club timeshare membership in January 2019 for £21,150 (net £18,333), financed by a £22,348 loan from Shawbrook Bank Limited. The product included holiday rights and a share in the net sale proceeds of an allocated property. In June 2023, they complained that the supplier had misrepresented the product as an investment in breach of the Timeshare Regulations, that the lender had failed to pay Section 75 claims for misrepresentation and breach of contract, that the credit relationship was unfair under Section 140A, and that the lender had failed to disclose a £1,117.40 commission payment to the supplier. The lender rejected all complaints. An investigator upheld the complaint, but the lender disagreed. The ombudsman found no actionable misrepresentation, no breach of contract, and that even if the supplier had breached the prohibition on marketing timeshares as investments, Mr and Mrs S' own evidence showed the prospect of financial gain was not a motivating factor in their purchase. The undisclosed commission was found to be too low to render the relationship unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no actionable misrepresentation by the supplier regarding the investment element of Fractional Club membership, as telling prospective members they were buying a share in a property that could appreciate was factually true. Regarding the alleged breach of Regulation 14(3) of the Timeshare Regulations (prohibition on marketing timeshares as investments), while the ombudsman acknowledged it was possible the supplier breached this regulation, the key question was whether such a breach rendered the credit relationship unfair. The ombudsman found that Mr and Mrs S' own evidence did not demonstrate that the prospect of financial gain was an important and motivating factor in their purchase decision - they did not provide sufficient detail about expected profits or the sale of the allocated property, and their statement was silent on the principal holiday rights element of the product. Therefore, even if a breach occurred, it would not have changed their purchasing decision. Regarding the undisclosed commission of £1,117.40 (5% of amount borrowed), the ombudsman applied the Supreme Court's guidance from Hopcraft/Johnson and found the commission was not high enough to render the relationship unfair, particularly given that Mr and Mrs S had the information necessary to understand the cost of credit and compare alternatives. The ombudsman also found no fiduciary duty was owed by the supplier when acting as credit broker, and that regulatory breaches do not automatically create unfairness under Section 140A - they must be considered in the round with their actual impact on the complainant.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website