Shawbrook Bank Limited · DRN-6249296

The complaint Mr P and Ms S’s complaint is, in essence, that Shawbrook Bank Limited (the ‘Lender’) acted unfairly and unreasonably by (1) being party to unfair credit relationships 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. What happened Mr P and Ms S were members of a timeshare provider (the ‘Supplier’), having purchased the product at the centre of this complaint, their membership of a timeshare that I’ll call the ‘Fractional Club’ – points in which Mr P and Ms S purchased on the dates below: • 1494 fractional points on 17 March 2013 for £18,699 (‘ Purchase Agreement 1’) • 1820 fractional points on 16 September 2013 for £25,269 (‘ Purchase Agreement 2’), having traded in the fractional points from the first of these purchases as part payment for the second. These purchases were financed with two loans from the Lender. The first was for £18,699 (‘Credit Agreement 1’). This loan was settled in full on 18 October 2013. This was financed by a second loan for £25,610 (‘Credit Agreement 2’) which was taken out on 16 September 2013, with the remainder paying for the additional fractional membership points. This second loan was settled in full on 3 December 2016. As these complaints are concerned with the purchases on 17 March 2013 and 16 September 2013, these are the ‘Times of Sale’ for the purposes of my decision. Fractional Club membership was asset backed – which meant it gave Mr P and Ms S more than just holiday rights. It also included a share in the net sale proceeds of a property named on the relevant purchase agreement (which I’ll refer to as the ‘Allocated Property’) after their membership term ends. Mr P and Ms S – using a professional representative (the ‘PR’) – wrote to the Lender on 4 November 2021 (the ‘Letter of Complaint’) to raise a number of different concerns about both purchases. 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 initially dealt with Mr P and Ms S’s concerns as disputes and issued a response letter on 15 November 2021 rejecting both complaints as it considered that they had been brought too late under the Limitation Act 1980 (‘LA’). The complaint was then referred to the Financial Ombudsman Service. It was assessed by an Investigator who did not uphold the complaints. They agreed that the complaint related to the first purchase had been brought too late to be considered, and that the second case had been brought too late for the section 75 elements to be considered. The investigator did not uphold the section 140A elements of the second purchase on its merits.

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Mr P and Ms S disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. I reviewed and considered all the arguments and submissions made by PR and the Lender, including those made in response to our Investigator’s view before issuing my provisional decision on 22 December 2026. In my provisional decision, I said that I agreed with our Investigator that I didn’t think the Financial Ombudsman Service has the jurisdiction to consider Mr P and Ms S’s complaint about the Lender’s participation in and/or perpetuation of an unfair credit relationship under Section 140A of the CCA for both Credit Agreement 1 and Credit Agreement 2. I concluded that the complaint had been made too late in respect of Credit Agreement 1, but had been made in time in respect of Credit Agreement 2. I dealt with whether our Service has jurisdiction to consider Mr P and Ms S’s complaint that the credit relationship between them and the Lender was unfair to them under Section 140A of the CCA in a separate decision. This decision considers the merits of Mr P and Ms S’s: • complaint that the credit relationship between them and the Lender in respect to Credit Agreement 2 was unfair to them under Section 140A of the CCA. • complaint about the way the Lender handled their claim under Section 75 of the CCA. Taking each of these in turn: I have considered that as the loan in Credit Agreement 2 refinanced the loan in Credit Agreement 1, what happened at the Time of Sale 1 could be relevant to deciding if there is an unfairness arising in Credit Agreement 2. Given this, I have considered the entirety of the credit relationships between Mr P and Ms S and the Lender. In my provisional decision, I said in relation to their claim that the credit relationship in Credit Agreement 2 was unfair to them: “Having considered the entirety of the credit relationships between Mr P and Ms S and the Lender along with all the circumstances of the complaint, I don’t think the credit relationships between them were 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 Times of Sale along with any relevant training material; 2. The provision of information by the Supplier at the Times of Sale, including the contractual documentation and disclaimers made by the Supplier; 3. The commission arrangements between the Lender and the Supplier at the Time of Sale and the disclosure of those arrangements; 4. Evidence provided by both parties on what was likely to have been said and/or done at the Times of Sale; 5. The inherent probabilities of the sale given its circumstances; and, when relevant 6. Any existing unfairness from a related credit agreement.

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I have then considered the impact of these on the fairness of the relevant credit relationships between Mr P and Ms S and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mr P and Ms S’s complaint about the Lender being party to unfair credit relationships was made for several reasons. The PR says, for instance, that the right checks weren’t carried out before the Lender lent to Mr P and Ms S. I haven’t seen anything to persuade me that was the case in this complaint given its circumstances. But 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 Mr P and Ms S was actually unaffordable before also concluding that they lost out as a result and then consider whether the credit relationship with the Lender was unfair to them for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mr P and Ms S. Connected to this is the suggestion by the PR that the Credit Agreements were arranged by an unauthorised credit broker, the upshot of which is to suggest that the Lender wasn’t permitted to enforce the Credit Agreements. However, it looks to me like Mr P and Ms S knew, amongst other things, how much they were borrowing and repaying each month, who they were borrowing from and that they were borrowing money to pay for Fractional Club membership. And as none of the lending looks like it was unaffordable for them, even if one or more of the Credit Agreements were arranged by a broker that didn’t have the necessary permission to do so (which I make no formal finding on), I can’t see why that led to Mr P and Ms S’s financial loss – such that I can say that the credit relationships in question were unfair on them as a result. And with that being the case, I’m not persuaded that it would be fair or reasonable to tell the Lender to compensate them, even if the loans weren’t arranged properly. The PR also says that there was one or more unfair contract terms in the Purchase Agreement. But as I can’t see that any such terms were operated unfairly against Mr P and Ms S in practice, nor that any such terms led them to behave in a certain way to their detriment, I’m not persuaded that any of the terms governing Fractional Club membership are likely to have led to an unfairness that warrants a remedy. I acknowledge that Mr P and Ms S may have felt weary after sales processes that went on for a long time. But they say little about what was said and/or done by the Supplier during their sales presentations 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 P and Ms S made the decision to purchase Fractional Club membership because their ability to exercise that choice was significantly impaired by pressure from the Supplier. Overall, therefore, I don’t think that Mr P and Ms S’s credit relationship with the Lender for Credit Agreement 2 was rendered unfair to them under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR says the credit relationship with the Lender was unfair to them. 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. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations

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I am satisfied that Mr P and Ms S’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 says that the Supplier did exactly that at the Time of Sale – saying, in summary, that Mr P and Ms S were told by the Supplier that Fractional Club membership was the type of investment that would only increase in value. 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. Shares in the Allocated Properties clearly constituted investments as they offered Mr P and Ms S 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. 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 P and Ms S 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. There is competing evidence in this complaint as to whether Fractional Club membership was marketed and/or sold by the Supplier at the Times 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 P and Ms S, the financial value of their share in the net sales proceeds of the Allocated Properties along with the investment considerations, risks and rewards attached to them. 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 equally possible that Fractional Club membership was marketed and sold to Mr P and Ms S as an investment in breach of Regulation 14(3).

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However, 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 particular issue for the purposes of this decision. Were the credit relationships between the Lender and the Consumer rendered unfair? 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 breaches had on the fairness of the credit relationships between Mr P and Ms S and the Lender under the Credit Agreements and related Purchase Agreements as 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. Indeed, it seems to me that, if I am to conclude that a breach of Regulation 14(3) led to credit relationships between Mr P and Ms S and the Lender that were unfair to them and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led them to enter into the Purchase Agreements and the Credit Agreements is an important consideration. But on my reading of the evidence before me, the prospect of a financial gain from Fractional Club membership was not an important and motivating factor when Mr P and Ms S decided to go ahead with their purchase. Mr P and Ms S provided a statement to PR, which was then forwarded to us. This was undated, but the PR said that it had been produced on 8 February 2020. In its response to our Investigator’s view, the Lender expressed doubt that this was the case, but I have no evidence to contradict that it was produced at that time. Having said that, Mr P and Ms S purchased the fractional membership in September 2013, but didn’t complain until November 2021, over eight years after the sale. They didn’t provide any of their own memories of the sale until February 2020, so over six years after the sale. The courts have long taken the position that memories fade and change over time and that being a part of a complaints process can also affect one’s memories. The majority of the statement, when referencing the circumstances of this complaint, concerned Mr P and Ms S’s disappointment with the difficulty they had when operating the membership. The statement makes no mention of the role the investment element of the membership played in their decision to purchase the product. And with that being the case, I’m not persuaded that I can give those written recollections the weight necessary to finding that the credit relationship in question was unfair for reasons relating to a breach of the relevant prohibition. That doesn’t mean they weren’t interested in a share in the Allocated Properties. After all, that wouldn’t be surprising given the nature of the product at the centre of this complaint. But as Mr P and Ms S themselves don’t persuade me that their purchases were motivated by their shares in the Allocated Properties and the possibility of a profit, I don’t think breaches of Regulation 14(3) by the Supplier were likely to have been material to the decisions Mr P and Ms S 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, I am not persuaded that Mr P and Ms S ‘s decision to purchase Fractional Club membership

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at the Times of Sale were 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 purchases whether or not there had been a breach of Regulation 14(3). I have also considered that as the loan in Credit Agreement 2 refinanced the loan in Credit Agreement 1, what happened at the Time of Sale 1 could be relevant to deciding if there is an unfairness arising in Credit Agreement 2. As Mr P and Ms S’s statement makes no mention of the role that the investment element of the membership played in their decision to purchase it, I don’t think this gives rise to an unfairness for the reasons already given above. And for that reason, I do not think the credit relationships between Mr P and Ms S and the Lender were unfair to them even if the Supplier had breached Regulation 14(3).” Turning now to look at Mr P and Ms S’s complaint about the way the Lender handled their claim under Section 75 of the CCA, in my provisional decision, I said in relation to this: “Section 75 of the CCA operates quite differently to Section 140A and, when it applies, it can give borrowers a very different ground for complaint against their lender. Whereas, as I’ve explained, Section 140A imposes responsibilities on creditors in relation to the fairness of their credit relationships, Section 75 simply creates a financial liability that the creditor is bound to pay. Liability under Section 75 isn’t based on anything the lender does wrong, but upon the misrepresentations and breaches of contract by the supplier, for which Section 75 imposes on the lender a “like claim” to that which the borrower enjoys against the supplier. If the lender is notified of a valid Section 75 claim, it should pay its liability. And if it fails or refuses to do so, that failure or refusal can give rise to a complaint to the Financial Ombudsman Service. So, when a complaint is referred to the Financial Ombudsman Service on the back of an unsuccessful attempt to advance a Section 75 claim, the act or omission that engages the Service’s jurisdiction is the creditor’s refusal to accept and pay the debtor’s claim – rather than anything that occurs before the claim was put to the creditor, such as the supplier’s alleged misrepresentation(s) and/or breach(es) of contract. As a result, the 6 and 3 year time limit (under DISP 2.8.2 (2) R) to complain about an unsuccessful attempt to initiate a Section 75 claim doesn’t usually start until the respondent firm answers and refuses the claim. In this case, as the Lender refused to accept and pay Mr P and Ms S’s claim on 19 August 2022, their primary time limit (of 6 years) only started at that time. And as this complaint about the Lender’s handling of that claim was referred to the Financial Ombudsman Service within six months, it was made in time for the purpose of the rules on our jurisdiction. However, as I’ve already indicated, I don’t think it would be fair or reasonable to uphold this complaint for reasons relating to Mr P and Ms S’s Section 75 claims. As a general rule, creditors can reasonably reject Section 75 claims that they are first informed about after the claim has become time-barred under the LA as it wouldn’t be fair to expect creditors to look into such claims so long after the liability arose and after a limitation defence would be available in court. So, it is relevant to consider whether Mrs Mr P and Ms S’s Section 75 claims were time-barred under the LA before they put it to the Lender. A claim under Section 75 is a “like” claim against the creditor. It essentially mirrors the claim the consumer could make against the Supplier.

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A claim for misrepresentation against the Supplier would ordinarily be made under Section 2(1) of the Misrepresentation Act 1967. And the limitation period to make such a claim expires six years from the date on which the cause of action accrued (see Section 2 of the LA). But a claim, like the ones in question here, under Section 75 is also “an action to recover any sum by virtue of any enactment” under Section 9 of the LA. And the limitation period under that provision is also six years from the date on which the cause of action accrued. The dates on which the causes of action accrued were the Time of Sales. I say this because Mr P and Ms S entered into the purchase of their timeshare at those times based on the alleged misrepresentations of the Supplier – which they say they relied on. And as the loan from the Lender was used to help finance the purchase, it was when they entered into the Credit Agreement that they suffered a loss. Mr P and Ms S first notified the Lender of their Section 75 claim on 2 November 2021. And as more than six years had passed between Time of Sale and when they first put their claims to the Lender, I don’t think it was unfair or unreasonable of the Lender to reject their concerns about the Supplier’s alleged misrepresentations.” In my provisional decision, I concluded that although Mr P and Ms S’s complaint about a credit relationship with the Lender that was unfair was within the jurisdiction of this Service to consider for Credit Agreement 2, having considered the entirety of the credit relationships between Mr P and Ms S and the Lender along with all the circumstances of the complaint, I don’t think the credit relationships between them were likely to have been rendered unfair for the purposes of Section 140A. And in terms of Mr P and Ms S’s complaint about the Lender’s decision to reject their concerns about the Supplier’s alleged misrepresentations under Section 75 of the CCA was made in time under DISP 2.8.2 R (2). But the Lender didn’t act unfairly or unreasonably by coming to the decision it did. I asked both Mr P and Ms S and the Lender to provide any further evidence they wished to be considered. The Lender responded to my provisional decision, accepting it but not providing any further evidence. Neither Mr P and Ms S nor the PR responded. So, I’m now finalising my decision. As set out above, this decision only addresses the merits of Mr P and Ms S’s complaint. The legal and regulatory context In considering what is fair and reasonable in all the circumstances of the complaint, I am required under DISP 3.6.4R to take into account: relevant (i) law and regulations; (ii) regulators’ rules, guidance and standards; and (iii) codes of practice; and (where appropriate), what I consider to have been good industry practice at the relevant time. The legal and regulatory context that I think is relevant to this complaint is no different to that shared in several hundred published ombudsman decisions on very similar complaints – which can be found on the Financial Ombudsman Service’s website. And with that being the case, it is not necessary to set out that context here. But I would add that the following regulatory rules/guidance are also relevant: The Office of Fair Trading’s Irresponsible Lending Guidance – 31 March 2010 The primary purpose of this guidance was to provide greater clarity for businesses and

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consumer representatives as to the business practices that the Office of Fair Trading (the ‘OFT’) thought might have constituted irresponsible lending for the purposes of Section 25(2B) of the CCA. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2 • Paragraph 2.3 • Paragraph 5.5 The OFT’s Guidance for Credit Brokers and Intermediaries - 24 November 2011 The primary purpose of this guidance was to provide clarity for credit brokers and credit intermediaries as to the standards expected of them by the OFT when they dealt with actual or prospective borrowers. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2 • Paragraph 3.7 • Paragraph 4.8 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, I still do not find that this complaint should be upheld. I have considered all the evidence in this case afresh. However, as neither Mr P and Ms S nor the Lender responded to my provisional decision, I can see no reason to alter my view. So, in conclusion, I don’t think the credit relationships between Mr P and Ms S and the Lender were rendered unfair for the purposes of Section 140A for the reasons set out above and in my PD. As I also said in my PD, as a general rule, creditors can reasonably reject Section 75 claims that they are first informed about after the claim has become time-barred under the LA as it wouldn’t be fair to expect creditors to look into such claims so long after the liability arose and after a limitation defence would be available in court. So, it is relevant to consider whether Mr P and Ms S’s Section 75 claim was likely to be time-barred under the LA by a court when they put it to the Lender. A claim under Section 75 is a “like” claim against the creditor. It essentially mirrors the claim the consumer could make against the Supplier. A claim for misrepresentation against the Supplier would ordinarily be made under Section 2(1) of the Misrepresentation Act 1967. And the limitation period to make such a claim expires six years from the date on which the cause of action accrued (see Section 2 of the LA). But a claim, like the one in question here, under Section 75 is also “an action to recover any sum by virtue of any enactment” under Section 9 of the LA. And the limitation period under that provision is also six years from the date on which the cause of action accrued.

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The date on which the cause of action accrued was the Time of Sale. I say this because Mr P and Ms S entered into the purchase of their timeshare at that time based on the alleged misrepresentations of the Supplier – which they say they relied on. And as the loan from the Lender was used to help finance the purchase, it was when they entered into the Credit Agreement that they suffered a loss. Mr P and Ms S first notified Shawbrook of their Section 75 claim on 2 November 2021. And as more than six years had passed between Time of Sale and when they first put their claims to the Lender, I don’t think it was unfair or unreasonable of the Lender to reject their concerns about the Supplier’s alleged misrepresentations. Consequently, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mr P and Ms S’s Section 75 claim. And having taken everything into account, I see no other reason why it would be fair or reasonable to direct the Lender to compensate them. My final decision I do not uphold this complaint, for the reasons given above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr P and Ms S to accept or reject my decision before 21 April 2026. Bill Catchpole Ombudsman

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