Mitsubishi HC Capital UK Plc · DRN-6081138

The complaint Mrs K’s complaint is, in essence, that Mitsubishi HC Capital UK Plc trading as Novuna Consumer Finance1 (the ‘Lender’) acted unfairly and unreasonably by (1) being party to an unfair credit relationship with them under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’) and (2) deciding against paying claims under Section 75 of the CCA. The timeshare in question was bought jointly by Mr and Mrs K, but as the loan used for the purchase was in Mrs K’s sole name, she is the only eligible complainant here. I will, however, refer to both Mr and Mrs K where it is appropriate to do so. What happened Mr and Mrs K were members of a timeshare provider (the ‘Supplier’) – having purchased a number of products from it over time. But the product at the centre of this complaint is their membership of a timeshare that I’ll call the ‘Fractional Club’ – which they bought on 5 August 2012 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy 3,304 fractional points at a cost of £45,045 (the ‘Purchase Agreement’), but after trading in their existing 2,501 membership points they ended up paying £12,532. Unlike their existing membership, the Fractional Club was asset backed – which meant it gave Mr and Mrs K more than just holiday rights. It also included a share in the net sale proceeds of a property named on the Purchase Agreement (the ‘Allocated Property’) after their membership term ends. Mrs K paid for their Fractional Club membership by taking finance of £12,532 from the Lender (the ‘Credit Agreement’) in her sole name. Mrs K – using a professional representative (the ‘PR’) – wrote to the Lender on 31 January 2017 (the ‘Letter of Complaint’) to raise a number of different concerns. As those concerns haven’t changed since they were first raised, and as both sides are familiar with them, it isn’t necessary to repeat them in detail here beyond the summary above. The Lender dealt with Mrs K’s concerns as a complaint and issued its final response letter on 18 March 2017, rejecting it on every ground. The complaint was then referred to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, thought it ought to be upheld. He thought that Mrs K’s credit relationship with the Lender had been rendered unfair by a material breach of Regulation 14(3) of the Timeshare Regulations2 by the Supplier, as he thought it had sold and/or marketed the Fractional Club to Mr and Mrs K as an investment. The Lender disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. The provisional decision 1 At the time the lending was agreed the Lender was trading as ‘Hitachi Capital Consumer Finance’. 2 The Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010

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Having considered all of the evidence that had been submitted, I didn’t think the complaint ought to be upheld. I set out my initial thoughts in a provisional decision (the ‘PD’) which was sent to both sides, with an invitation to submit any new evidence or arguments that they wished me to consider before I finalised my decision. In the PD (which forms part of this decision) I said: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done that, I do not currently think this complaint should be upheld. However, before I explain why, I want to make it clear that my role as an Ombudsman is not to address every single point that has been made to date. Instead, it is to decide what is fair and reasonable in the circumstances of this complaint. So, if I have not commented on, or referred to, something that either party has said, that does not mean I have not considered it. Mrs K’s claims under Section 75 of the CCA In the Letter of Complaint to the Lender, Mrs K has said that the Supplier, at the Time of Sale, made misrepresentations upon which she and Mr K relied when making their decision to purchase the Fractional Club membership. The Letter of Complaint also said that Mr and Mrs K were not guaranteed to receive the proceeds of the sale of the Allocated Property, and this was positioned as a breach of the terms of the Purchase Agreement. The CCA introduced a regime of connected lender liability under Section 75 that affords consumers (“debtors”) a right of recourse against lenders that provide the finance for the acquisition of goods or services from third-party merchants (“suppliers”) in the event that there is an actionable misrepresentation and/or breach of contract by the supplier. In short, a claim against the Lender under Section 75 essentially mirrors the claim Mr K could make against the Supplier. Certain conditions must be met if the protection afforded to consumers is engaged, including, for instance, the cash price of the purchase. The purchase price must be more than £100 but no more than £30,000. So, if the purchase price of the product is in excess of £30,000 (irrespective of any trade-in allowance), a claim under Section 75 cannot succeed. But where the purchase price is in excess of £30,000, a claim can be considered under Section 75A of the CCA. But a claim under S75A can only relate to a ‘breach of contract’ – misrepresentation isn’t included. I have gone on to say what I think this means in respect of Mr K’s Section 75 claims. The purchase price of Mr and Mrs K’s Fractional Club membership was £45,045. As this is in excess of £30,000, I am satisfied that Mrs K’s claim under Section 75 cannot succeed. But as I’ve said, Section 75A of the CCA allows for a claim should the price of the purchase be over £30,000, but only in relation to a breach of contract by the Supplier. But I am not satisfied that there has been a breach of contract here. What is being suggested is that there is no guarantee that Mr and Mrs K will receive their share of the proceeds of the sale of the Allocated Property at the end of the membership term. There is nothing in the Letter of Complaint which explains why this may be the case, but in any event, any such breach of contract lies in the future and is yet uncertain. And I’ve seen nothing in the contractual paperwork which leads me to think the Allocated Property will not be put up for sale by the Trustees at the relevant time.

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So, from the evidence I have seen, I do not think the Lender is liable to pay Mr and Mrs K any compensation for a breach of contract by the Supplier. And with that being the case, I do not think the Lender acted unfairly or unreasonably in relation to this aspect of the complaint either. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that the terms of the Fractional Club membership were breached by the Supplier, or that their claim of misrepresentation under Section 75 of the CCA should succeed. But there is this, and other aspects of the sales process that, being the subject of dissatisfaction, I must explore with Section 140A in mind if I’m to consider this complaint in full – which is what I’ve done next. The PR says, for instance, that: 1. Fractional Club membership was misrepresented to Mr and Mrs K because they were told by the Supplier that it: a. had a guaranteed end date when that was not true; and b. was the only way of releasing themselves from their existing membership when that was not true. 2. The right checks weren’t carried out before the Lender lent to Mr and Mrs K; and 3. Mr and Mrs K were pressured by the Supplier into purchasing Fractional Club membership at the Time of Sale. Also, although not set out in these precise terms, the Letter of Complaint said that the Fractional Club membership had an investment element to it. So, if the membership was sold and/or marketed as an investment, then this would likely be a breach of Regulation 14(3) of the Timeshare Regulations, which could have been a reason why the credit relationship between Mrs K and the Lender was unfair to her. However, having considered the entirety of the credit relationship between Mr and Mrs K and the Lender along with all of the circumstances of the complaint, I don’t think the credit relationship between them was likely to have been rendered unfair for the purposes of Section 140A. When coming to that conclusion, and in carrying out my analysis, I have looked at: 1. The standard of the Supplier’s commercial conduct – which includes its sales and marketing practices at the Time of Sale along with any relevant training material; 2. The provision of information by the Supplier at the Time of Sale, including the contractual documentation and disclaimers made by the Supplier; 3. The commission arrangements in place between the Lender and the Supplier. 4. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; and 5. The inherent probabilities of the sale given its circumstances. I have then considered the impact of these on the fairness of the credit relationship between Mrs K and the Lender.

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The Supplier’s sales & marketing practices at the Time of Sale It was said in the Letter of Complaint that Fractional Club membership had been misrepresented by the Supplier at the Time of Sale because Mr and Mrs K were told or led to believe by the Supplier that Fractional Club membership: (1) Had a guaranteed end date when that was not true; and (2) was the only way of releasing themselves from their existing membership when that was not true. As I understand it, the sale of the Allocated Property could be postponed in certain circumstances according to the Fractional Club Rules. But Mr and Mrs K say little to nothing to persuade me that they were given a guarantee by the Supplier that the Allocated Property would be sold on a specific date when such a promise would have been impossible to stand by given the inevitable uncertainty of selling property some way into the future. And as regards point 2, Mr K wrote to the PR in December 2016 (I shall refer to this letter in full later) setting out his and Mrs K’s recollections of the Time of Sale and their circumstances and concerns. In this letter, although setting out that the Fractional Club was a way in which they could exit their membership, it does not say that they were told it was the only way. With that being the case, there isn’t enough evidence on file to support the PR’s allegation that Fractional Club membership had been misrepresented in this way either. So, while I recognise that Mrs K and the PR have concerns about the way in which Fractional Club membership was sold by the Supplier, when looking at the sale with Section 140A of the CCA in mind, I am not persuaded that there was a factual and material misrepresentation by the Supplier at the Time of Sale. For the reasons I’ve set out above, I’m not persuaded that there was. And while the PR says that the right affordability checks weren’t carried out at the Time of Sale, even if I were to find that the Lender failed to do everything it should have when it agreed to lend (and I make no such finding), I would have to be satisfied that the money lent to Mrs K was actually unaffordable before also concluding that she lost out as a result, and then consider whether the credit relationship with the Lender was unfair to her for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mrs K. And as regards the allegation that they were put under undue pressure, I acknowledge that Mr and Mrs K may have felt weary after a sales process that went on for a long time. But they say little about what was said and/or done by the Supplier during their sales presentation that made them feel as if they had no choice but to purchase Fractional Club membership when they simply did not want to. They were also given a 14-day cooling off period and they have not provided a credible explanation for why they did not cancel their membership during that time. And with all of that being the case, there is insufficient evidence to demonstrate that Mr and Mrs K made the decision to purchase Fractional Club membership, or to take the Credit Agreement, because their ability to exercise those choices was significantly impaired by pressure from the Supplier. Overall, therefore, I don’t think that Mrs K’s credit relationship with the Lender was rendered unfair to her under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR now says the credit relationship with the Lender was unfair to Mrs K. And that’s the suggestion that Fractional Club membership was marketed and sold to them as an investment in breach of prohibition against selling timeshares in that way.

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The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mr and Mrs K’s Fractional Club membership met the definition of a “timeshare contract” and was a “regulated contract” for the purposes of the Timeshare Regulations. Regulation 14(3) of the Timeshare Regulations prohibited the Supplier from marketing or selling Fractional Club membership as an investment. This is what the provision said at the Time of Sale: “A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.” But the PR and Mr K say that the Supplier did exactly that at the Time of Sale. In a letter to the PR dated 29 December 2016, Mr K says the following regarding the Time of Sale: “In August 2011 when we were at [the Supplier] we were asked to attend their office in order to bring us up to date with what was new etc. We already had several main concerns, the in-perpetuity clause, the increasing maintenance charges and the availability in August. Neither of us can remember who interviewed us but from time to time they were backed up by someone of higher status. We were told that it was precisely to address these problems that the "Fractional Ownership" scheme had been introduced. We were told that the maintenance charge was fixed and could only rise with inflation. We were told that the contract was for a fixed term and at the end of the term they would all be sold together and that it was likely that we would receive a benefit from the sale. The usual term I believe was something like 19 years but as someone had sold their contract back ours would be for 16 years. I pointed out that in 2027 I would be 81 years old but again we were told that there would be a possibility of selling it on, just like the person whose contract we were buying. We were also told that unlike the points system, although we were still dealing with trading points for a holiday there would be a nominal charge of 3% booking fee on the points used per holiday. 3% sounds nominal but not when trading several thousand points it added about £500 extra to the cost of the holiday! We were keen to get out of the in-perpetuity clause and also lead [sic] to believe that our ownership would yield some cash value. As usual it was late afternoon and we were told that we had to decide there and then whether or not to accept. They came up with the figure of £1200.00 to convert which also gave us more points, 3304, which we did not actually need and have never used! We were not asked if we wanted more points, we were just presented with their figures.” The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this provisional decision, and by reference to the decided authorities, an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. And a share in the Allocated Property clearly constituted an investment as it offered Mr and Mrs K the prospect of a financial return – whether or not, like all investments, that was more than what they first put into it. But it is important to note at this stage that the fact that Fractional Club membership included an investment element did not, itself, transgress the prohibition in Regulation 14(3). That provision prohibits the marketing and selling of a timeshare contract as an investment. It doesn’t prohibit the mere existence of an investment element in a timeshare contract or prohibit the marketing and selling of such a timeshare contract per se.

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In other words, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. To conclude, therefore, that Fractional Club membership was marketed or sold to Mr and Mrs K as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to them as an investment, i.e. told them or led them to believe that Fractional Club membership offered them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. And there is competing evidence in this complaint as to whether Fractional Club membership was marketed and/or sold by the Supplier at the Time of Sale as an investment in breach of regulation 14(3) of the Timeshare Regulations. On the one hand, it is clear that the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective purchasers, such as Mr and Mrs K, the financial value of their share in the net sales proceeds of the Allocated Property along with the investment considerations, risks and rewards attached to them. But on the other hand, I acknowledge that the Supplier’s sales process left open the possibility that the sales representative may have positioned Fractional Club membership as an investment. So, I accept that it’s possible that Fractional Club membership was marketed and sold to Mr and Mrs K as an investment in breach of Regulation 14(3). But I don’t, on the evidence provided, and in the circumstances here, think that it is probable that there was such a breach. I think this having read Mr K’s description of the Time of Sale. He says the Fractional Club membership was described by the Supplier as follows: “We were told that the contract was for a fixed term and at the end of the term they would all be sold together and that it was likely that we would receive a benefit from the sale.” This seems to be nothing more than a factual description of the way the membership worked – it does not suggest to me that it was positioned by the Supplier as something that could provide Mr and Mrs K with a profit when the Allocated Property came to be sold. I acknowledge they have later said that they believed the membership would later ‘yield some cash value’ but this again does not suggest to me this would or could be a profit – just that they would get something back. But, even if I’m wrong about that, and the Supplier did breach Regulation 14(3) in the way it presented the Fractional Club membership, whether or not there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome in this complaint for reasons I will come on to shortly. And with that being the case, it’s not necessary to make a formal finding on that issue for the purposes of this decision. Would the credit relationship between the Lender and Mrs K have been rendered unfair to her had there been a breach of Regulation 14(3) of the Timeshare Regulations? Having found that it was possible that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I now need to consider what impact such a breach (if there was one) would have had on the fairness of the credit relationship between Mrs K and the Lender under the Credit Agreement and related Purchase Agreement, as the case law on Section 140A makes it clear that regulatory breaches do not automatically

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create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. Indeed, it seems to me that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mrs K and the Lender that was unfair to her and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led Mr and Mrs K to enter into the Purchase Agreement and Mrs K into the Credit Agreement is an important consideration. Direct testimony from the consumer, in full and in their own words, is so important in a case like this, because it allows the decision-maker to assess credibility and consistency, to know precisely what was supposedly said, and to understand the context in which it was supposedly said. It is also important so the decision-maker can see that the Letter of Complaint genuinely reflects the consumer’s testimony. In this case there is no testimony from Mrs K herself, but as I said above, Mr K wrote to the PR in December 2016 setting out what he remembered (as a party to the purchase) about the Time of Sale and their circumstances at the time. So, I think this provides evidence that I can place weight on when considering the merits of Mrs K’s complaint. But, on my reading of what Mr K says, I am not persuaded that the prospect of a financial gain from Fractional Club membership was an important and motivating factor when they decided to go ahead with their purchase. It seems that Mr and Mrs K had some concerns about their existing membership when they went into the Time of Sale. Mr K says as much in his statement: “We already had several main concerns, the in-perpetuity clause, the increasing maintenance charges and the availability in August.” And he says that the Supplier positioned Fractional Club membership to them as a solution to these problems: “We were told that it was precisely to address these problems that the "Fractional Ownership" scheme had been introduced.” He then goes on to describe what the Supplier told them about the Fractional Club: “We were told that the maintenance charge was fixed and could only rise with inflation. We were told that the contract was for a fixed term and at the end of the term they would all be sold together and that it was likely that we would receive a benefit from the sale.” But, as I’ve said, in my view this is nothing more than a description of how the Fractional Club worked. It does not suggest or imply that Mr and Mrs K were told they could make a profit when the Allocated Property was sold. Indeed, what they’ve said here doesn’t actually specify what ‘benefit’ they are referring to. I acknowledge that Mr K has said that “We were keen to get out of the in-perpetuity clause and also lead [sic] to believe that our ownership would yield some cash value” but as I’ve said, this does not lead me to think that what they had been told they could get back was a profit. On my reading it just alludes to getting something back. And in any case, given their concerns that they had about their existing membership, I think they would have made the decision to trade in their existing points for the Fractional Club anyway. After all, they went into the meeting with a number of concerns about how their membership was working, and the Fractional Club was positioned as a solution to all of those problems. I therefore think it likely that the potential return from the sale was not a deciding factor here.

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That doesn’t mean they weren’t interested in a share in the Allocated Property. After all, that wouldn’t be surprising given the nature of the product at the centre of this complaint. But as Mr and Mrs K themselves don’t persuade me that their purchase was motivated by their share in the Allocated Property and the possibility of a profit, I don’t think a breach of Regulation 14(3) by the Supplier was likely to have been material to the decision they ultimately made. On balance, therefore, even if the Supplier had marketed or sold the Fractional Club membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations (and as I’ve said, I don’t think it did), I am not persuaded that Mr and Mrs K’s decision to purchase Fractional Club membership at the Time of Sale was motivated by the prospect of a financial gain (i.e., a profit). On the contrary, I think the evidence suggests they would have pressed ahead with their purchase whether or not there had been a breach of Regulation 14(3). And for that reason, I do not think the credit relationship between Mrs K and the Lender was unfair to her even if the Supplier had breached Regulation 14(3). The provision of information by the Supplier at the Time of Sale The PR says that a payment of commission from the Lender to the Supplier at the Time of Sale should lead me to uphold this complaint because, simply put, information in relation to that payment went undisclosed at the Time of Sale. As both sides already know, the Supreme Court handed down an important judgment on 1 August 2025 in a series of cases concerned with the issue of commission: Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd [2025] UKSC 33 (‘Hopcraft, Johnson and Wrench’). The Supreme Court ruled that, in each of the three cases, the commission payments made to car dealers by lenders were legal, as claims for the tort of bribery, or the dishonest assistance of a breach of fiduciary duty, had to be predicated on the car dealer owing a fiduciary duty to the consumer, which the car dealers did not owe. A “disinterested duty”, as described in Wood v Commercial First Business Ltd & ors and Business Mortgage Finance 4 plc v Pengelly [2021] EWCA Civ 471, is not enough. However, the Supreme Court held that the credit relationship between the lender and Mr Johnson was unfair under Section 140A of the CCA because of the commission paid by the lender to the car dealer. The main reasons for coming to that conclusion included, amongst other things, the following factors: 1. The size of the commission (as a percentage of the total charge for credit). In Mr Johnson’s case it was 55%. This was “so high” and “a powerful indication that the relationship…was unfair” (see paragraph 327); 2. The failure to disclose the commission; and 3. The concealment of the commercial tie between the car dealer and the lender. The Supreme Court also confirmed that the following factors, in what was a non-exhaustive list, will normally be relevant when assessing whether a credit relationship was/is unfair under Section 140A of the CCA: 1. The size of the commission as a proportion of the charge for credit; 2. The way in which commission is calculated (a discretionary commission arrangement, for example, may lead to higher interest rates); 3. The characteristics of the consumer;

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4. The extent of any disclosure and the manner of that disclosure (which, insofar as Section 56 of the CCA is engaged, includes any disclosure by a supplier when acting as a broker); and 5. Compliance with the regulatory rules. From my reading of the Supreme Court’s judgment in Hopcraft, Johnson and Wrench, it sets out principles which apply to credit brokers other than car dealer–credit brokers. So, when considering allegations of undisclosed payments of commission like the one in this complaint, Hopcraft, Johnson and Wrench is relevant law that I’m required to consider under Rule 3.6.4 of the Financial Conduct Authority’s Dispute Resolution Rules (‘DISP’). But I don’t think Hopcraft, Johnson and Wrench assists Mrs K in arguing that her credit relationship with the Lender was unfair to her for reasons relating to commission given the facts and circumstances of this complaint. As the Supreme Court said in paragraph 326 of its judgment in Hopcraft, Johnson and Wrench, it’s not possible to simply apply the reasoning of the Supreme Court in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 (‘Plevin’) to this complaint (as the PR does) when it’s concerned with a product and marketplace that were very different to those in Plevin. What’s more, Mr and Mrs K were provided with information as to the price of the Fractional Club membership and the cost of the Credit Agreement (interest rate, fees, APR and monthly repayments). So, Mrs K was at least in a position from which she could understand the cost of the Credit Agreement and compare it with other options that might have been available at the Time of Sale. I haven’t seen anything to suggest that the Lender and Supplier were tied to one another contractually or commercially in a way that wasn’t properly disclosed to Mrs K, nor have I seen anything that persuades me that the commission arrangement between them gave the Supplier a choice over the interest rate that led Mrs K into a credit agreement that cost disproportionately more than it otherwise could have. I acknowledge that it’s possible that the Lender and the Supplier failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. But as I’ve said before, the case law on Section 140A makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. And with that being the case, it isn’t necessary to make a formal finding on that because, even if the Lender and the Supplier failed to follow the relevant regulatory guidance at the Time of Sale, it is for the reasons set out below that I don’t currently think any such failure is itself a reason to find the credit relationship in question unfair to Mrs K. In stark contrast to the facts of Mr Johnson’s case, the amount of commission paid by the Lender to the Supplier for arranging the Credit Agreement that Mrs K entered into wasn’t high. At £1,284.53, it was only 10.25% of the amount borrowed and even less than that (6%) as a proportion of the charge for credit. So, had she known at the Time of Sale that the Supplier was going to be paid a flat rate of commission at that level, I’m not currently persuaded that she either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mr and Mrs K wanted Fractional Club membership and had no obvious means of their own to pay for it. And at such a low level, the impact of commission on the cost of the credit they needed for a timeshare they wanted doesn’t strike me as disproportionate. So, I think Mrs K would still have taken out the loan to fund their purchase at the Time of Sale had the amount of commission been disclosed.

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What’s more, based on what I’ve seen so far, the Supplier’s role as a credit broker wasn’t a separate service and distinct from its role as the seller of timeshares. It was simply a means to an end in the Supplier’s overall pursuit of a successful timeshare sale. I can’t see that the Supplier gave an undertaking – either expressly or impliedly – to put to one side its commercial interests in pursuit of that goal when arranging the Credit Agreement. And as it wasn’t acting as an agent of Mr and Mrs K but as the supplier of contractual rights they obtained under the Purchase Agreement, the transaction doesn’t strike me as one with features that suggest the Supplier had an obligation of ‘loyalty’ to Mrs K when arranging the Credit Agreement and thus a fiduciary duty. Overall, therefore, I’m not currently persuaded that the commission arrangements between the Supplier and the Lender were likely to have led to a sufficiently extreme inequality of knowledge that rendered the credit relationship unfair to Mrs K. Section 140A: Conclusion Given all of the factors I’ve looked at in this part of my decision, and having taken all of them into account, I’m not persuaded that the credit relationship between Mrs K and the Lender under the Credit Agreement and related Purchase Agreement was unfair to her. And as things currently stand, I don’t think it would be fair or reasonable that I uphold this complaint on that basis. Commission: The Alternative Grounds of Complaint While I’ve found that Mrs K’s credit relationship with the Lender wasn’t unfair to her for reasons relating to the commission arrangements between it and the Supplier, two of the grounds on which I came to that conclusion also constitute separate and freestanding complaints to Mrs K’s complaint about an unfair credit relationship. So, for completeness, I’ve considered those grounds on that basis here. The first ground relates to whether the Lender is liable for the dishonest assistance of a breach of fiduciary duty by the Supplier because it took a payment of commission from the Lender without telling Mrs K (i.e., secretly). And the second relates to the Lender’s compliance with the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. However, for the reasons I set out above, I’m not persuaded that the Supplier – when acting as credit broker – owed Mrs K a fiduciary duty. So, the remedies that might be available at law in relation to the payment of secret commission aren’t, in my view, available to her. And while it’s possible that the Lender failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between it and the Supplier, I don’t think any such failure on the Lender’s part is itself a reason to uphold this complaint because, for the reasons I also set out above, I think she would still have taken out the loan to fund their purchase at the Time of Sale had there been more adequate disclosure of the commission arrangements that applied at that time. Overall Conclusion In conclusion, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mrs K’s Section 75 claims, and I am not persuaded that the Lender was party to a credit relationship with her under the Credit Agreement and related Purchase Agreement that was unfair to her for the purposes of Section 140A of the CCA. And having taken everything into account, I see no other reason why it would be fair or reasonable to direct the Lender to compensate Mrs K.”

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The responses to the provisional decision The Lender accepted my provisional decision. The PR disagreed with my overall conclusion, and provided submissions which, while primarily concerned with the suggestion that Mr and Mrs K’s Fractional Club membership had been marketed and sold as an investment in contravention of a prohibition on selling timeshares in that way, included allegations of fraudulent misrepresentation on the basis that Mr and Mrs K were told by the Supplier at the Time of Sale that: (1) They were buying part ownership of a physical property; (2) Fractional Club membership was an investment; (3) The Allocated Property would be sold at the end of the membership term, which was of a fixed duration; and (4) They would receive a share of the net sales proceeds of sale when the Allocated Property is sold. The PR also repeated its concerns about the payment of commission to the Supplier by the Lender – albeit with a focus on the Supreme Court’s judgment in Hopcraft, Johnson and Wrench. As a result, the complaint was passed back to me for further thought and my Final Decision. The Legal and Regulatory Context The legal and regulatory context that I think is relevant to this complaint has been shared in several hundred published decisions on very similar complaints, as well as in previous correspondence with the parties. So, there’s no need for me to set this out again in detail here. I simply remind the parties that our rules3 say that in considering what is fair and reasonable in all the circumstances of the complaint, I will take into account: relevant (i) law and regulations; (ii) regulators’ rules, guidance and standards; and (iii) codes of practice; and (when appropriate), what I consider to have been good industry practice at the relevant time. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done that afresh, I’m not persuaded to depart from my provisional decision for reasons I’ll now explain. Before I do, I want to make it clear that I recognise that this complaint, when originally made, was wide ranging and made on a number of different grounds - including: (1) Misrepresentations by the Supplier at the Time of Sale giving Mrs K a claim against the Lender under Section 75 of the CCA, which the Lender failed to accept and pay. (2) A breach of contract by the Supplier giving Mrs K a claim against the Lender under Section 75 of the CCA, which the Lender failed to accept and pay. (3) The Lender being party to an unfair credit relationship under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A of the CCA. 3 Specifically Rule 3.6.4 in the Dispute Resolution Rules found in the Financial Conduct Authority’s Handbook for Rules and Guidance.

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However, as the PR’s response to my provisional decision relates, in the main, to (3), as I haven’t been provided with new arguments and/or evidence to consider in relation to (1) or (2), I see no reason to change or add to my conclusions (as set out in the summary of my provisional decision above) in relation to them. Indeed, as I said in my provisional decision, my role as an Ombudsman is to decide what’s fair and reasonable in the circumstances of this complaint – rather than address every single point that’s been made. And with that being the case, while I have read all of the PR’s submissions in full, if I have not commented on, or referred to, something that either party has said, that does not mean I have not considered it. What’s more, it is important to make the point that, in contrast to what might happen in court, neither side to this complaint has a burden of proof that it must discharge. After all, the jurisdiction under which I’m deciding this complaint is inquisitorial rather than adversarial – which means that my findings are made on the balance of probabilities, in light of the evidence and/or arguments from both sides. So, while the PR argues in response to my provisional decision that, under Section 140B(9) of the CCA, it is for the Lender to prove that its credit relationship with Mrs K wasn’t unfair simply because she alleges that it was, that fails to understand that the Financial Ombudsman Service deals with complaints rather than causes of action. And, in any event, to suggest that unsubstantiated allegations of fact must be disproved by the Lender if the credit relationship isn’t to be deemed unfair also oversimplifies if not misunderstands the legal position. As HHJ David Cooke said in paragraph 26 of his judgment on Promontoria (Henrico) Ltd v. Gurcharn Samra [2019] EWHC 2327 (Ch): “…the onus is on [the creditor] to show, to the normal civil standard, that the relationship is not unfair because of any of the reasons set out in s 140A(1)(a)-(c). Whether it is so unfair is a matter for the court's overall judgment having regard to all the relevant circumstances and matters, including matters relating (i.e. personal) to the creditor and debtor. This onus on the claimant does not however mean, in my judgement…that where [the borrower alleging an unfair credit relationship] makes allegations of fact on which he relies he does not have the burden of proving them to the normal civil standard. The onus placed on the creditor is as to the relationship between it and the debtor, and does not have the effect that factual allegations made by Mr Samra must be accepted unless they can be positively disproved by contrary evidence.”4 Section 140A of the CCA: did the Lender participate in an unfair credit relationship? In the PD I explained why I didn’t think Mrs K’s claim of misrepresentation under Section 75 of the CCA ought to succeed. But in in response to my provisional decision, the PR argues that the Fractional Club membership wasn’t worth enough to make Mr and Mrs K a profit and, as such, the following representations by the Supplier were fraudulent: (1) They were buying part ownership of a physical property; (2) Fractional Club membership was an investment; (3) The Allocated Property would be sold; and (4) They would receive a share of the net sales proceeds of sale when the Allocated Property is sold. The PR takes that view because it says the evidence suggests that (1) any rights in the Allocated Property are personal rights rather than the rights of ownership, (2) the Lender 4 As approved by the Supreme Court in Smith v. The Royal Bank of Scotland plc [2023] UKSC 34 – see paragraph 40.

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hasn’t provided any evidence that the Allocated Property exists or that it will sell in the future (making it unlikely that Mr and Mrs K will receive anything from their share in it) and, (3) by the PR’s own calculations, given the initial and ongoing costs of Fractional Club membership, it was never possible to make a profit from the sale of the Allocated Property. The law relating to misrepresentation is a combination of the common law, equity and statute – though, as I understand it, the Misrepresentation Act 1967 didn’t alter the rules as to what constitutes an effective misrepresentation. Summarising the relevant pages in Chitty on Contracts, a material and actionable misrepresentation is an untrue statement of existing fact or law made by one party (or his agent for the purposes of passing on the representation, acting within the scope of his authority) to another party that induced that party to enter into a contract. However, a mere statement of opinion, rather than fact or law, which proves to be unfounded, isn’t a misrepresentation unless the opinion amounts to a statement of fact and it can be proved that the person who gave it did not hold it or could not reasonably have held it. It also needs to be shown that the other party understood and relied on the implied factual misrepresentation. Telling prospective members that they were investing their money because they were buying a fraction or share of one of the Supplier’s properties was not untrue – nor was it untrue to tell prospective members that they would receive some money when the allocated property is sold. After all, Mr and Mrs K’s share in the Allocated Property clearly constituted an investment as it offered them the prospect of a financial return – whether or not, like all investments, that was more than what they first put into it. But as the PR knows, while the term “investment” is not defined in the Timeshare Regulations, it was agreed by the parties in Shawbrook & BPF v FOS that, by reference to the decided authorities, “an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit” (see paragraph 56). Yet, contrary to what the PR says, none of the contractual paperwork made any promises that a profit might be made. And as I said in the PD, Mr and Mrs K say little to nothing to persuade me that they were given a guarantee by the Supplier that the Allocated Property would be sold on a specific date when such a promise would have been impossible to stand by given the inevitable uncertainty of selling property some way into the future. As I said in my provisional decision, the Supplier’s training material left open the possibility that the sales representative may have positioned Fractional Club membership as an investment. So, I accept that it’s possible that Fractional Club membership was marketed and sold to Mr and Mrs K as an investment orally. But again, Mr and Mrs K say little about what was said, by whom and in what circumstances for the purposes of determining whether representations by the Supplier amounted to false statements of existing fact rather than expressions of honestly held opinions about the likely value of the Allocated Property and the proposed sale in the future. And while the PR’s own calculations might cast some doubt over the likelihood of the Allocated Property being sold at a profit given the initial and ongoing costs of it to Mr and Mrs K, there isn’t enough evidence to persuade me that the relevant sales representative(s) would have carried out that sort of calculation at the Time of Sale or would otherwise have had information that would indicate that they knew or ought reasonably to have known at the time that any such representations weren’t true.

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And while the PR might question the exact legal mechanism used to give prospective members an interest in allocated properties, that does not change the fact that the shares of members (like Mr and Mrs K) were clearly the purchase of a share of the net sale proceeds of a specific property in a specific resort. In response to the PD, the PR has said that the level of annual maintenance that Mr and Mrs K would need to pay as part of their membership was also misrepresented. Mr K says that they were told this fee was fixed and would only rise by the inflation rate. But again, there is nothing to suggest that this was presented as a fact by the Supplier at the Time of Sale. It seems more likely that the representation, if made, would have been an honestly held opinion about the future levels of maintenance fees. And in any event, neither Mrs K nor the PR have provided evidence of how much they have actually paid over the course of their membership. I’m not persuaded, therefore, by the allegations of fraudulent misrepresentation from the PR. And with that being the case, I am not persuaded that Mrs K’s credit relationship with the Lender was rendered unfair to her in this regard. However, there are, of course, other reasons for why the PR argues that the credit relationship in question was unfair. But having reconsidered the entirety of that relationship along with everything that has now been said and/or provided by both sides, I still don’t think the credit relationship between Mrs K and the Lender was likely to have been rendered unfair to her for the purposes of Section 140A. When coming to that conclusion, I have looked again at: 1. The standard of the Supplier’s commercial conduct – which includes its sales and marketing practices at the Time of Sale along with any relevant training material; 2. The provision of information by the Supplier at the Time of Sale, including the contractual documentation and disclaimers made by the Supplier; 3. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; and 4. The inherent probabilities of the sale given its circumstances. I have also reconsidered any commercial (including commission) arrangements between the Lender and the Supplier at the Time of Sale and the disclosure of those arrangements. I’ll turn now to what continues to be the main reason for the PR’s assertion that the credit relationship in question was unfair. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations As I said in my provisional decision, there is competing evidence in this complaint as to whether the Fractional Club membership was marketed and/or sold by the Supplier at the Time of Sale as an investment in breach of Regulation 14(3) of the Timeshare Regulations. I acknowledged that it was possible that Fractional Club membership was marketed and sold to Mr and Mrs K as an investment in breach of Regulation 14(3). But I said that while it was possible, I didn’t think it was probable, a view I still hold. I said that I didn’t think the Supplier had done anything more than simply setting out, in a factual way, how the membership worked. But in response, the PR says I have misinterpreted Shawbrook & BPF v FOS. It said that the court found that marketing a timeshare product as a way to get something back, as opposed

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to getting nothing back, constitutes marketing it as an investment. And that is an actionable breach of Regulation 14(3). But I think the PR is wrong here. As I’ve said, the term “investment” is not defined in the Timeshare Regulations. But in Shawbrook & BPF v FOS, the parties agreed that, by reference to the decided authorities, “an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit” at [56] (my emphasis). I have and will continue to use the same definition. So, for there to have been a breach of Regulation 14(3) the membership would have needed to have been sold and/or marketed as something that could or would provide Mr and Mrs K with a profit. Mr K described the sale in the following way: “We were told that the contract was for a fixed term and at the end of the term they would all be sold together and that it was likely that we would receive a benefit from the sale.” Having reconsidered this, and having thought about what the PR has said, I remain of the opinion that this is nothing more than a factual description of the way the membership worked – it does not suggest to me that it was positioned by the Supplier as something that could provide Mr and Mrs K with a profit when the Allocated Property came to be sold. I acknowledge again that they have later said that they believed the membership would later ‘yield some cash value’ but this again does not suggest to me this would or could be a profit – just that they would get something back. But I also thought and still think that it isn’t necessary to make a formal finding on that particular issue for the purposes of my determination on this complaint because a breach of Regulation 14(3) by the Supplier is not itself determinative of the outcome in this complaint unless the impact of such a breach suggested otherwise. I think this having regard to what Mrs Justice Collins Rice also said In Shawbrook & BPF v FOS. She didn’t find that a breach of Regulation14(3) of the Timeshare Regulations was "causative of the legal relations entered into". She recognised that such a breach was "conduct that knocks away the central consumer protection safeguard", but she went on to say that it was the ombudsmen behind the two reviewed decisions who found that such a breach was, given the facts and circumstances of the relevant complaints, causative of the consumers in question purchasing their timeshares and taking out loans to do so. What’s more, the Supreme Court’s judgment in Plevin makes it clear that regulatory breaches do not automatically create unfairness for the purposes of Section 140A. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. I am also mindful of what HHJ Waksman QC (as he then was) and HHJ Worster had to say in Carney v NM Rothschild & Sons Ltd [2018] EWHC 958 (‘Carney’) and Kerrigan v Elevate Credit International Ltd [2020] EWHC 2169 (Comm) (‘Kerrigan’) (respectively) on causation. In Carney, HHJ Waksman QC said the following in paragraph 51: “[…] In cases of wrong advice and misrepresentation, it would be odd if any relief could be considered if they did not have at least some material impact on the debtor when deciding whether or not to enter the agreement. […] in a case like the one before me, if in fact the debtors would have entered into the agreement in any event, this must surely count against a finding of unfair relationship under s140A. […]”

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And in Kerrigan, HHJ Worster said this in paragraphs 213 and 214: “[…] The terms of section 140A(1) CCA do not impose a requirement of “causation” in the sense that the debtor must show that a breach caused a loss for an award of substantial damages to be made. The focus is on the unfairness of the relationship, and the court's approach to the granting of relief is informed by that, rather than by a demonstration that a particular act caused a particular loss. Section 140A(1) provides only that the court may make an order if it determines that the relationship is unfair to the debtor. […] […] There is a link between (i) the failings of the creditor which lead to the unfairness in the relationship, (ii) the unfairness itself, and (iii) the relief. It is not to be analysed in the sort of linear terms which arise when considering causation proper. The court is to have regard to all the relevant circumstances when determining whether the relationship is unfair, and the same sort of approach applies when considering what relief is required to remedy that unfairness. […]” So it still seems to me, that if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mrs K and the Lender that was unfair to her and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led Mr and Mrs K to enter into the Purchase Agreement and Mrs K into the Credit Agreement is an important consideration. Indeed, doing that accords with common sense, for if events would have unfolded in the same way whether or not such a pre-contractual breach had occurred, it would be difficult to attribute any particular importance to the breach when deciding whether an unfair debtor- creditor relationship ensued, or whether a remedy is appropriate. If there had been a breach of Regulation 14(3), would it have rendered the credit relationship between Mrs K and the Lender unfair to her? Having found that it was possible that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I have considered (as I did in my provisional decision) what impact that breach (if there was one) had on the fairness of the credit relationship between Mrs K and the Lender under the Credit Agreement and related Purchase Agreement. And on my re-reading of the evidence before me, I’m still not persuaded that the prospect of a financial gain from Fractional Club membership was an important and motivating factor when Mr and Mrs K decided to go ahead with their purchase, such that they would have made an entirely different purchasing decision had there not been a breach of Regulation 14(3). And I say that because, as I set out in the PD, I think Mr and Mrs K had some concerns about their existing membership when they went into the sales presentation at the Time of Sale. And the Supplier presented the Fractional Club membership as a solution to those concerns. “We already had several main concerns, the in-perpetuity clause, the increasing maintenance charges and the availability in August … We were told that it was precisely to address these problems that the "Fractional Ownership" scheme had been introduced.” I again acknowledge that Mr K has said that “We were keen to get out of the in-perpetuity clause and also lead [sic] to believe that our ownership would yield some cash value” but as I’ve said, this does not lead me to think that what they had been told they could get back was

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a profit. On my re-reading of this I remain of the opinion that it just alludes to getting something back. In response to the PD, the PR has said that the judgement in Shawbrook & BPF v FOS found that the investment pitch did not need to be the sole driver of the transaction, but merely that it played an important role in the sale as a significant selling point. I have considered this point. But, given the concerns that they had about their existing membership, I think Mr and Mrs K would have made the decision to trade in their existing points for the Fractional Club whether or not it had been presented in a way that breached Regulation 14(3) of the Timeshare Regulations. After all, they went into the meeting with a number of concerns about how their membership was working, and the Fractional Club was positioned as a solution to all of those problems. I therefore think it likely that the potential return from the sale was not a deciding factor here. The PR has set out that the overall cost of the Fractional Club membership, when including the cost of the credit and the annual maintenance fees over its duration, was actually in excess of £97,000. And it says this means that a single annual holiday using the membership actually costs Mr and Mrs K over £6,000. It says that no rational consumer would willingly exchange a perpetuity clause for a 16-year contract costing nearly £100,000 overall, and £6,000 for an annual week’s holiday simply to exit an agreement. It says this proves the primary inducement must have been the cash return at the end of the term, because no consumer would commit to such a disproportionate outlay without the firm expectation of recovering their capital. But I don’t agree with the PR here. The true cost of the membership set out by the PR includes maintenance fees that Mr and Mrs K were always going to have to pay as they were existing members. The actual true cost of the membership was the initial outlay plus the interest they paid over the five months the loan was running before the balance was cleared on 22 January 2013, not over the full length of the agreement. So, the total expenditure incurred by Mr and Mrs K when they bought the Fractional Club was significantly less than has been set out by the PR. But in any case, it seems likely that Mrs K was aware, at the Time of Sale, of the cost of the Fractional Club membership, the interest she was being charged, as well as that they needed to pay maintenance fees every year and the cost of those fees in the first year. But as I’ve also said, that doesn’t mean they weren’t interested in a share in the Allocated Property. But as Mr and Mrs K themselves don’t persuade me that their purchase was motivated by their share in the Allocated Property and the possibility of a profit, I don’t think a breach of Regulation 14(3) by the Supplier was likely to have been material to the decision they ultimately made. On balance, therefore, for the reasons I’ve set out above and in the PD, I don’t think the credit relationship between Mrs K and the Lender was unfair to her even if the Supplier had breached Regulation 14(3). The provision of information by the Supplier at the Time of Sale In its response to the PD, when it was setting out the allegation that there had been fraudulent misrepresentations made by the Supplier at the Time of Sale, the PR said that there had been no documentation provided to Mr and Mrs K showing the value of the property, or confirmation of their legal or beneficial interest in it.

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However, when it comes to the market value of the Allocated Property, I would draw the PR’s attention to what Mrs Justice Collins Rice said in paragraphs 106 and 110 of her judgment in Shawbrook & BPF v FOS: “Both ombudsmen rely on the reference in Sch.1 to 'exact nature and content of the rights' as being the basis for perceiving a legal obligation to provide 'value' information. But first, having regard to the high level of specificity in the Schedule, it is obvious that 'value' information is nowhere specified as such. And second, 'exact nature and content of the rights' is clearly intended, in context, to be a fair and objective identification and description of those rights. 'Value' information may possibly be context for, or commentary on, those rights, but the 'exact nature and content of rights' is something different from information which may (or may not) be relevant to how much they might be worth, now or in the future.” “I do not, and do not need to, go so far as to infer from the Regulations a legal prohibition on the provision of valuation information. My conclusion is that there is no legal obligation, derivable from Reg.12 of the Timeshare Regulations, to provide it, and that the ombudsmen's solution is, in its own terms, distinctly problematic for the regulatory framework. It remains my view that the principal legal consumer-protection control over buying and selling fractional ownership timeshares is the Reg.14(3) prohibition. That provision alone makes it hard enough to market a timeshare product containing a bare interest in the proceeds of the deferred sale of real property lawfully, without inviting the fleshing out of the law as positively demanding investor-protection information obligations at the same time.” (My emphasis added) In any event, as I’ve already indicated, the case law on Section 140A makes it clear that it does not automatically follow that regulatory breaches create unfairness for the purposes of the unfair relationship provisions. The extent to which such mistakes render a credit relationship unfair must also be determined according to their impact on the complainant. So, even if it could be said that the Supplier failed to give Mr and Mrs K sufficient information, in good time, on, for example, the value of the property, neither they nor the PR have persuaded me that they were deprived of information that would have led them to make a different purchasing decision at the Time of Sale when I’ve already found that the prospect of a financial gain from the sale of the Allocated Property was not an important and motivating factor behind their purchase. And with that being the case, even if there were information failings (which I make no formal finding on), I can’t see why that could be said to have rendered the credit relationship in question unfair to Mrs K. And as regards the non-disclosure of the commission arrangements at the Time of Sale, I set out my thoughts in relation to the implications of the Supreme Court’s judgment in Hopcraft, Johnson and Wrench for this complaint in the PD. I remain satisfied that the Lender has provided me with sufficient information to reach a conclusion about its commercial (including commission) arrangements with the Supplier. I’ve seen nothing in this case that leads me to think that the information in question is inaccurate. And while I recognise that the PR might disagree with my provisional thoughts on this matter, it hasn’t offered any evidence and/or arguments that lead me to think that (1) the factors referenced by the Supreme Court have a bearing on the outcome of this complaint given its circumstances or (2) there are any other reasons why the commercial (including commission) arrangements between the Supplier and the Lender rendered the credit relationship between the latter and Mrs K under the Credit Agreement and related Purchase Agreement unfair for the purposes of Section 140A.

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Conclusion Having adopted my provisional findings, and reconsidered the facts and circumstances of this complaint, I still don’t think the Lender acted unfairly or unreasonably when it dealt with Mrs K’s Section 75 claims. I’m also still not persuaded that the Lender was party to a credit relationship with Mrs K that was unfair to her for the purposes of section 140A of the CCA. And having taken everything into account, I see no other reason why it would be fair or reasonable for me to direct the Lender to compensate Mrs K. My final decision I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs K to accept or reject my decision before 28 April 2026. Chris Riggs Ombudsman

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