Upheld: Other regulated complaint complaint against Mitsubishi HC Capital UK PLC, trading as Novuna

Decision detail

Summary

Mr L and Mrs L purchased Fractional Club membership in July 2012 for £11,400 (after trade-in), financed by a loan from Novuna. The Fractional Club was asset-backed timeshare membership that included a share in the net sale proceeds of an allocated property. Mr L complained that the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and selling the membership as an investment, and that this rendered the credit relationship unfair under Section 140A of the Consumer Credit Act 1974. The Lender rejected the complaint. The Ombudsman upheld the complaint, finding that the Supplier's training materials and sales presentation indicated that sales representatives would have positioned membership as offering investment potential and financial gain. Although contemporaneous disclaimers stated the product was not sold as an investment, the Ombudsman found that Mr L's testimony, combined with his propensity to invest in property and the Supplier's sales materials, demonstrated that the investment representation was material to his purchasing decision. The Ombudsman ordered the Lender to refund all loan repayments plus 8% simple interest, and to indemnify Mr L against ongoing liabilities relating to the membership points.

The Ombudsman's reasoning

The Ombudsman found that the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and selling Fractional Club membership as an investment. The training materials and sales slides indicated that sales representatives would have led prospective purchasers to believe that membership offered the prospect of financial gain and profit. Although contemporaneous paperwork included disclaimers, the Ombudsman considered that what happened in practice was more important than the written disclaimers. The Ombudsman found that Mr L's testimony, despite some inconsistencies, contained a core of acceptable evidence that Fractional Club membership was presented as an investment. This was supported by Mr L's propensity to invest in property (evidenced by his June 2011 purchase of a managed investment property) and his statement that the prospect of financial gain was an important motivating factor in his decision to purchase. Under Section 56 of the CCA, the Supplier's conduct during antecedent negotiations was deemed to be conduct by the Lender as statutory agent. This breach of Regulation 14(3), combined with the broader circumstances of the credit relationship, rendered the relationship between Mr L and the Lender unfair under Section 140A of the CCA. The Ombudsman rejected arguments that Mr L's use of holiday benefits or the reduction in management charges undermined this finding, as these did not negate the materiality of the investment representation to his purchasing decision.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website