Shawbrook Bank Limited · DRN-6264599

The complaint Mr and Mrs S’s complaint is, in essence, that Shawbrook Bank Limited (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 a claim under Section 75 of the CCA. What happened Mr and Mrs S were longstanding members of a timeshare arrangement from 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 Mr and Mrs S’s purchase of a timeshare membership (the ‘Fractional Club’) from the Supplier on 9 April 2014 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy a set annual week (week 14) in Apartment 300 at the resort for €17,241 (the ‘Purchase Agreement’). This Fractional Club membership was asset backed – which meant it gave Mr and Mrs S more than just holiday rights. It also included a share in the net sale proceeds of a property named on their Purchase Agreement (the ‘Allocated Property’) after their membership term ends. Mr and Mrs S paid for their Fractional Club membership by taking finance of £15,000 from the Lender in their joint names (the ‘Credit Agreement’). Mr and Mrs S – using a professional representative (the ‘PR’) – wrote to the Lender on 8 April 2020 (the ‘Letter of Complaint’) to raise a number of different concerns about their Fractional Club membership and the associated Credit Agreement. 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 did not send a response to their complaint (it later said it had not received it) within the eight weeks required by the regulator, so the PR referred Mr and Mrs S’s complaint to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, upheld the complaint on its merits. The Investigator thought that the Supplier had marketed and sold Fractional Club membership as an investment to Mr and Mrs S at the Time of Sale in breach of Regulation 14(3) of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 (the ‘Timeshare Regulations’). And given the impact of that breach on their purchasing decision, the Investigator concluded that the credit relationship between the Lender and Mr and Mrs S was rendered unfair to them for the purposes of Section 140A of the CCA. The Lender initially said it didn’t think this Service had jurisdiction to consider the complaint, because it said it had no record of the original complaint being sent. But when the Investigator provided evidence of an auto-acknowledgement that the Lender’s systems had

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send to the PR in response, it accepted that the complaint had been sent. But it disagreed with the Investigator’s assessment of the merits of the complaint and asked for an Ombudsman’s decision – which is why it was passed to me. The provisional decision Having considered everything that had been submitted, I agreed with the Investigator in that I thought this complaint ought to be upheld, but I thought the reasons for doing so should be expanded upon somewhat. As such, I set out my initial thoughts on the merits of Mr and Mrs S’s complaint in a provisional decision (the ‘PD’) and invited both sides to submit any new evidence and/or arguments they wished me to consider before I finalised my decision. In the PD I said: “I have considered all the available evidence and arguments to decide what is fair and reasonable in the circumstances of this complaint. And having done that, I currently think that this complaint should be upheld because the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and/or selling Fractional Club membership to Mr and Mrs S as an investment, which, in the circumstances of this complaint, rendered the credit relationship between them and the Lender unfair to them for the purposes of Section 140A of the CCA. 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, while I recognise that there are a number of aspects to this complaint, it is not necessary to make formal findings on all of them because, even if one or more of those aspects ought to succeed, the redress I am currently proposing puts Mr and Mrs S in the same or a better position than they would otherwise be in. The witness testimony As part of its submissions to this Service, on 17 January 2024 the PR sent testimony from Mr S. This set out his and Mrs S’s recollections of their entire relationship with the Supplier from their initial purchase in 1996, up until the Time of Sale and the Fractional Club being considered here. As far as is relevant to this complaint, Mr S said: “In April 2014 we were on holiday and we were invited to a meeting we had fractional ownership at the point and we advised the representatives that the maintenance fee was £3,000. The new guy advised us if we invested into 1492 Suites they would exchange will take 6 weeks and pure points back, this was an incentive for us. We would return all certs and buy three-weeks in the 1492 suites Columbus – La Pinta was the name of Columbus had we thought this was a good selling point. He advised that this would end in 2030. This would mean if we purchased this we would have partial ownership of this property and then in 2030 they would sell the apartment and they would split the money back to the owners with a profit. This was guaranteed exit from La Pinta which was the main attraction to us at the time. During this meeting we were subjected to high pressured and very persistent sales tactics. This was partially in relation to having to make the decision on the day. We feel that we have been mis sold investment as timeshare. At the time we believed and trusted them in good faith that this was a good investment. […] At the time we felt pressured to get out the timeshare and we felt this was our option on the day.”

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I have considered how much weight I can place on what Mr S has said here when assessing the merits of their complaint. The statement is dated 1 October 2019, but it wasn’t sent to this Service until January 2024, so did not form part of the PR’s initial submission. Given this, I have thought about the risk that it was written later than the date the PR is indicating, and whether if this was the case, Mr S’s recollections may have been tainted by the complaints process, the wider conversations around allegations of timeshare mis-selling, or by the judgement in ‘Shawbrook & BPF v FOS’1. But I think that risk is low. The Letter of Complaint generally follows what has been written in the statement, so I think it likely that the statement informed the Letter of Complaint. I note that there appears to be some gaps in the testimony relating to some earlier sales – for example, when talking about a 2006 sale, the testimony reads: “As such on the xxx 2006 we purchased 2 bed deluxe apartment for the total cost of £xxxx. This was paid by ?” And there is a similar gap in the cost of their 2011 purchase. When considering how much weight I can place on Mr S’s statement, I am assisted by the judgement in the case of Smith v Secretary of State for Transport [2020] EWHC 1954 (QB). At paragraph 40 of the judgment, Mrs Justice Thornton helpfully summarised the case law on how a court should approach the assessment of oral evidence. Although in this case I have not heard direct oral evidence, I think this does set out a useful way to look at the evidence Mr S has provided. Paragraph 40 reads as follows: “At the start of the hearing, I raised with Counsel the issue of how the Court should assess his oral evidence in light of his communication difficulties. Overnight, Counsel agreed a helpful note setting out relevant case law, in particular the commercial case of Gestmin SPGS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) (Leggatt J as he then was at paragraphs 16-22) placed in context by the Court of Appeal in Kogan v Martin [2019] EWCA Civ 1645 (per Floyd LJ at paragraphs 88-89). In the context of language difficulties, Counsel pointed me to the observations of Stuart- Smith J in Arroyo v Equion Energia Ltd (formerly BP Exploration Co (Colombia) Ltd) [2016] EWHC 1699 (TCC) (paragraphs 250-251). Counsel were agreed that I should approach Mr Smith's evidence with the following in mind: a. In assessing oral evidence based on recollection of events which occurred many years ago, the Court must be alive to the unreliability of human memory. Research has shown that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts (Gestin and Kogan). 1 R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd and R (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin)

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b. A proper awareness of the fallibility of memory does not relieve judges of the task of making findings of fact based upon all the evidence. Heuristics or mental short cuts are no substitute for this essential judicial function. In particular, where a party's sworn evidence is disbelieved, the court must say why that is; it cannot simply ignore the evidence (Kogan). c. The task of the Court is always to go on looking for a kernel of truth even if a witness is in some respects unreliable (Arroyo). d. Exaggeration or even fabrication of parts of a witness' testimony does not exclude the possibility that there is a hard core of acceptable evidence within the body of the testimony (Arroyo). e. The mere fact that there are inconsistencies or unreliability in parts of a witness' evidence is normal in the Court's experience, which must be taken into account when assessing the evidence as a whole and whether some parts can be accepted as reliable (Arroyo). f. Wading through a mass of evidence, much of it usually uncorroborated and often coming from witnesses who, for whatever reasons, may be neither reliable nor even truthful, the difficulty of discerning where the truth actually lies, what findings he can properly make, is often one of almost excruciating difficulty yet it is a task which judges are paid to perform to the best of her ability (Arroyo, citing Re A (a child) [2011] EWCA Civ 12 at para 20).” So, as I’ve said, I have thought about how much weight I can place on this statement when considering the merits of Mr and Mrs S’s complaint. In doing so I am cognisant of the fact that memories can fade over time, and that inconsistencies in evidence are a normal part of someone trying to remember what happened in the past. So, I would not be surprised if there are some inconsistencies between what he says has happened over the course of their purchases, and what other evidence may show. The question to consider, therefore, is whether there is a core of acceptable evidence from Mr S, such that the inconsistencies have little to no bearing on whether his testimony can be relied on, or whether such inconsistencies are fundamental enough to undermine, if not contradict, what the Supplier was likely to have said and/or done during the sale of the Fractional Club. But I don’t find the gaps in evidence set out above are in any way material to whether the Fractional Club membership was marketed to them as an investment. Given what I know about how this particular PR took testimony, I think it is likely that it was taken during the course of a telephone call, and the gap in the date, cost and the finance arrangement of the 2006 membership is most likely because Mr S was unable to recall those details at the time. And I don’t find that particularly surprising given he is recalling events from eight and 13 years earlier. Having minor gaps in memory in the statement about much earlier and unrelated purchases does not call into question the credibility of everything he has said and are not, in my view, material to whether the testimony can be relied on. I do not think these gaps in evidence fundamentally undermine the crux of the statement, which, in my view, sets out that the Fractional Club membership was sold to them as an investment. So, overall, I am satisfied that I can place weight on Mr S’s testimony when considering what most likely happened at the Time of Sale and the merits of Mr and Mrs S’s complaint.

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Section 140A of the CCA: did the Lender participate in an unfair credit relationship? Having considered the entirety of the credit relationship between Mr and Mrs S and the Lender along with all of the circumstances of the complaint, I 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 provision of information by the Supplier at the Time of Sale, including the contractual documentation and disclaimers probably made by the Supplier; 2. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; and 3. 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 Mr and Mrs S and the Lender. 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 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 Mr and Mrs S say that the Supplier did exactly that at the Time of Sale – saying, in summary, that they were told by the Supplier that Fractional Club membership was the type of investment that would provide them with a profit. 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. Mr and Mrs S’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 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 and Mrs 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

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them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. And although not submitted by either side in this case, I have previously seen evidence that there were disclaimers in the standard sales documents that went some way to saying that the Fractional Club membership wasn’t to be seen by purchasers as an investment. However, weighing up what happened in practice is, in my view, rarely as simple as thinking about what the contemporaneous paperwork was likely to have said. And for reasons I’ll now come on to, given the facts and circumstances of this complaint, I think the Supplier is likely to have breached Regulation 14(3) of the Timeshare Regulations. How the Supplier marketed and sold the Fractional Club membership Very little is known about how this particular Supplier trained its sales personnel to sell the Fractional Club. Indeed, it seems likely, given the lack of any evidence about how this was done, that this particular Supplier decided to sell its memberships, including the Fractional Club, with no guardrails. And Mr S has been clear in his statement (which as I’ve said, I find plausible and reliable) that they were told by the Supplier “…we would have partial ownership of this property and then in 2030 they would sell the apartment and they would split the money back to the owners with a profit.” I acknowledge that Mr S has not said there was any comparison between the expected level of financial return and the purchase price of the Fractional Club. However, if I were to only concern myself with express efforts to quantify to Mr and Mrs S the financial value of the proprietary interest they were offered, I think that would involve taking too narrow a view of the prohibition against marketing and selling timeshares as an investment in Regulation 14(3). When the Government consulted on the implementation of the Timeshare Regulations, it discussed what marketing or selling a timeshare as an investment might look like – saying that ‘[a] trader must not market or sell a timeshare or [long-term] holiday product as an investment. For example, there should not be any inference that the cost of the contract would be recoupable at a profit in the future (see regulation 14(3)).”2 And in my view that must have been correct because it would defeat the consumer-protection purpose of Regulation 14(3) if the concepts of marketing and selling a timeshare as an investment were interpreted too restrictively. So, even if a supplier implied to consumers that future financial returns (in the sense of possible profits) from a timeshare were a good reason to purchase it, I think its conduct was likely to have fallen foul of the prohibition against marketing or selling the product as an investment. 2 The Department for Business Innovation & Skills “Consultation on Implementation of EU Directive 2008/122/EC on Timeshare, Long-Term Holiday Products, Resale and Exchange Contracts (July 2010)”. https://assets.publishing.service.gov.uk/media/5a78d54ded915d0422065b2a/10-500-consultation-directive-timeshare- holiday.pdf

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Indeed, if I’m wrong about that, I find it difficult to explain why, in paragraphs 77 and 78 followed by 99 and 100 of Shawbrook & BPF v FOS when, Mrs Justice Collins Rice said the following: “[…] I endorse the observation made by Mr Jaffey KC, Counsel for BPF, that, whatever the position in principle, it is apparently a major challenge in practice for timeshare companies to market fractional ownership timeshares consistently with Reg.14(3). […] Getting the governance principles and paperwork right may not be quite enough. The problem comes back to the difficulty in articulating the intrinsic benefit of fractional ownership over any other timeshare from an individual consumer perspective. […] If it is not a prospect of getting more back from the ultimate proceeds of sale than the fractional ownership cost in the first place, what exactly is the benefit? […] What the interim use or value to a consumer is of a prospective share in the proceeds of a postponed sale of a property owned by a timeshare company – one they have no right to stay in meanwhile – is persistently elusive.” “[...] although the point is more latent in the first decision than in the second, it is clear that both ombudsmen viewed fractional ownership timeshares – simply by virtue of the interest they confer in the sale proceeds of real property unattached to any right to stay in it, and the prospect they undoubtedly hold out of at least 'something back' – as products which are inherently dangerous for consumers. It is a concern that, however scrupulously a fractional ownership timeshare is marketed otherwise, its offer of a 'bonus' property right and a 'return' of (if not on) cash at the end of a moderate term of years may well taste and feel like an investment to consumers who are putting money, loyalty, hope and desire into their purchase anyway. Any timeshare contract is a promise, or at the very least a prospect, of long-term delight. [...] A timeshare-plus contract suggests a prospect of happiness-plus. And a timeshare plus 'property rights' and 'money back' suggests adding the gold of solidity and lasting value to the silver of transient holiday joy.” I am aware that Shawbrook & BPF v FOS was not concerning this particular Fractional Club from this Supplier. But the essence of the memberships were the same, in that there was a fractional ownership of a property which would be sold after a certain length of time, and each ‘owner’ would get a proportionate return from the sale. So, I think the case does provide useful context to my deliberations. Mr S says in his testimony that the Fractional Club was sold to them by the Supplier as an investment. So, I’ve thought about how the membership would likely have been presented to Mr and Mrs S. As I‘ve said, there is nothing in this case to inform me about how the Supplier trained its staff, so I’ve considered the inherent probability of the allegation when assessing whether I find that thing did or did not happen. And I am satisfied I am able to do that. After all, in Onassis v. Vergottis [1968] 10 WLUK 101, Lord Pearce referred to the need to look at "probabilities", as well as contemporaneous documents and admitted or incontrovertible facts, when weighing the credibility of a witness's evidence (at p.431). In Armagas Ltd v. Mundogas SA (The Ocean Frost) [1986] 2 W.L.R. 1063, Goff LJ also referred to looking at “the overall probabilities” when ascertaining the truth (at p.57). And in Gestmin SGPS S.A. v. Credit Suisse (UK) Limited [2013] EWHC 3560, Leggatt J suggested (at para.22) that factual findings should be based on "inferences drawn from the documentary evidence and known or probable facts" (my emphasis). Here, I think it is inherently more probable that a timeshare product with an investment element is

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sold in a way promoting that element, and therefore risking a breach of Regulation14(3), compared with the sale of a product without the possibility of a monetary return.3 The Lender may say in response to this provisional decision, that it is not a breach of Regulation 14(3) to merely describe the nature of the product and how it worked, and I agree. But in the circumstances of this complaint, it wouldn’t have made much sense if the Supplier included this feature in the product without relying on it to promote the sale. As I’ve already set out, as regards what happened at the Time of Sale, Mr S has submitted testimony, which he says sets out their recollection of events. And as I’ve said, I am currently satisfied that I am able to place weight on what he has said occurred at the Time of Sale. And in any case, Mr S has not said that there was just an implication of a profit at the end of the term - he said the Supplier was explicit in that they would make a profit from their membership. So, on the balance of probabilities I think that is likely to be what Mr and Mrs S were led to believe at the relevant time. And for that reason, I think the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale. Was the credit relationship between the Lender and the Consumer rendered unfair? Having found that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I now need to consider what impact that breach had on the fairness of the credit relationship between Mr and Mrs S 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 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 Mr and Mrs S and the Lender that was 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 Agreement and the Credit Agreement is an important consideration. And having considered what Mr S has said, and from what he has said about their circumstances at the time, I think 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. After all, I can see from Mr S’s testimony that they were worried about the amount of money they had spent on timeshares over the years. For example, when talking about their previous purchase in 2011 he says: “We were very worried about our money at this point and we felt as though this was the only option to get our money back.” So, it seems in 2011 they were already looking for means to try and get something other than holidays from their memberships. I think they saw the Fractional Club as a way of getting money back after a set membership term, and I think that was the reason they bought it. Mr S says: “We feel that we have been mis sold investment as timeshare. At the time we believed and trusted them in good faith that this was a good investment.” 3 This is different to saying that it is more likely than not that a product with an investment element is sold as an investment, simply due to that investment element. For the avoidance of doubt, I make no such finding.

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That doesn’t mean they were not interested in holidays. Their own purchase history and testimony demonstrates that they quite clearly were, which is not surprising given the nature of the product at the centre of this complaint. And I can also see that they were interested in the shorter and defined membership term. But I think that was linked to the investment element of the membership, and was not, in my view, a standalone reason for which they made the purchase. But as Mr S says (plausibly in my view) that Fractional Club membership was marketed and sold to them at the Time of Sale as something that offered them more than just holiday rights, on the balance of probabilities, I think their purchase was motivated by their share in the Allocated Property and the possibility of a profit, as that share was one of the defining features of membership that marked it apart from the more ‘standard’ type of timeshare available to them. Mr and Mrs S have not said or suggested, for example, that they would have pressed ahead with the purchase in question had the Supplier not led them to believe that Fractional Club membership was an appealing investment opportunity. And as they faced the prospect of borrowing and repaying a substantial sum of money while subjecting themselves to long- term financial commitments, had they not been encouraged by the prospect of a financial gain from membership of the Fractional Club, I’m not persuaded that they would have pressed ahead with their purchase regardless. And with that being the case, I think the Supplier’s breach of Regulation 14(3) was material to the decision they ultimately made. Conclusion Given the facts and circumstances of this complaint, I think the Lender participated in and perpetuated an unfair credit relationship with Mr and Mrs S under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A. And with that being the case, taking everything into account, I think it is fair and reasonable that I uphold this complaint.” I then went on to set out what I considered to be a fair and reasonable way for the Lender to calculate and pay fair compensation to Mr and Mrs S. The responses to the provisional decision The PR, on Mr and Mrs S’s behalf, accepted what I had said in the PD with no further comment. The Lender replied and said that it would not challenge the provisional findings, but had some observations on some points that it did not agree with. As both sides have responded, the complaint has come back to me for a final decision. 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, in many ways, no different to that shared in several hundred published ombudsman decisions on very similar

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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 in detail here. 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 so, and having considered everything again in light of both sides’ responses to the PD, I see no reason to depart from the outcome reached in the provisional decision. I remain satisfied that this complaint ought to be upheld, but I will address the concerns raised by the Lender in its response to the PD. The Lender thought that the PD was premised on a material error of law in its approach to the prohibition under Regulation 14(3) of the Timeshare Regulations. It said the PD had said that the mere existence of the ‘prospect of a financial return’ constituted an ‘investment’, and in doing so falls into error by conflating two meanings of the word ‘return’: (i) a ‘return on investment’, which is normally understood to mean the measure of profit (the return) on the original investment; and (ii) a customer being told that some money will be ‘returned’ upon sale, which carries no connotation of financial gain/profit. The Lender said that the former is what must not be marketed under the Timeshare Regulations; and the latter is an inherent feature of fractional products and does not breach Regulation 14(3). But I don’t think the Lender has understood the point that was being made here. In the PD I set out what Regulation 14(3) said: “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.” And then I set out the definition of the word ‘investment’ I was using: “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.” But the Fractional Club was asset-backed by an Allocated Property, and the share in this property clearly constituted an investment as it offered the member the prospect of a financial return – whether or not, like all investments, that was more than what they first put into it. But there was no conflation of the word ‘return’ because I made it clear that the fact that the fractional 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. So, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. The Lender said that the wrong test had been applied to determine whether the credit relationship between it and Mr and Mrs S was unfair. It then quoted the following: “In the PD at page 9, the Ombudsman appears to have adopted a different test than that cited in Carney, he states “I think their purchase was motivated by their share in the Allocated Property and the possibility of a profit... And with that being the case, I think the

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Supplier’s breach of Regulation 14(3) was material to the decisions they ultimately made””. It said that this appears to reverse the burden of proof, in that I had appeared to start from the position that the prospect of a financial gain existed, but this was not insignificant enough for it not to render the relationship unfair. It said the starting point is to assess whether there is sufficient evidence of a material impact on the decision to enter the agreement. The Lender thought that in the absence of this evidence, the relationship ought not to be found unfair. But the Lender appears to have misunderstood what I had said. The burden of proof has not been reversed here. It is clear that it was on the basis that the Supplier’s breach of Regulation 14(3) at the Time of Sale was material to their purchasing decisions that I decided that the associated credit relationships had been rendered unfair. So, I am satisfied, as I set out in the PD, that Mr and Mrs S were motivated to make their Fractional Club purchase because of the associated share in the Allocated Property and the possibility of a profit. And because of that, the breach of Regulation 14(3) by the Supplier was material to the purchasing decision they ultimately made. The Lender then concluded by saying that the reliance on the witness testimony was unsafe. It thought this because the testimony contained vague and brief allegations, as well as being inconsistent and generic. It said it would have expected there to have been information about what Mr and Mrs S were told about the likely return or mechanisms of how the agreement works, which has not been mentioned. And it said the allegation’s credibility has not been challenged. But the PD considered, in some detail, both the provenance and contents of the statement, and I was satisfied that what had been recorded was Mr S’s recollections of their purchase. And I was satisfied, being cognisant of the fact that memories can fade over time, that Mr S’s testimony could be relied on, and the gaps in the testimony did not fundamentally undermine the crux of the statement. Having reconsidered everything again, I remain satisfied that it is safe to place weight on Mr S’s testimony when considering what most likely happened at the Time of Sale. And I find that his testimony, when considered alongside all of the evidence and circumstances, persuades me that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, and that breach was material to Mr and Mrs S’s purchasing decision. Conclusion So, although the Lender has said it would not challenge my provisional decision that this complaint ought to be upheld, I have considered everything that it has said in response. And having done so, I remain satisfied that this complaint ought to be upheld. I think the Lender participated in and perpetuated an unfair credit relationship with Mr and Mrs S under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A. Putting things right In the PD I set out what I considered to be a fair and reasonable way for the Lender to calculate and pay fair compensation to Mr and Mrs S. Neither side has made any comment on my proposed redress, so I see no reason to depart from my provisional thoughts on this issue. For the avoidance of doubt, I shall set out my directions below.

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Fair Compensation Having found that Mr and Mrs S would not have agreed to purchase Fractional Club membership at the Time of Sale were it not for the breach of Regulation 14(3) of the Timeshare Regulations by the Supplier (as deemed agent for the Lender), and the impact of that breach meaning that, in my view, the relationship between the Lender and the Consumer was unfair under Section 140A of the CCA, I think it would be fair and reasonable to put them back in the position they would have been in had they not purchased the Fractional Club membership (i.e., not entered into the Purchase Agreement), and therefore not entered into the Credit Agreement, provided Mr and Mrs S agree to assign to the Lender their membership rights and their share in the Allocated Property. Mr and Mrs S were existing timeshare members when they bought their Fractional Club membership. So, had Mr and Mrs S not purchased Fractional Club membership, they would have always been responsible to pay an annual management charge of some sort. With that being the case, any refund of the annual management charges paid by Mr and Mrs S from the Time of Sale as part of their Fractional Club membership should amount only to the difference between those charges and the annual management charges they would have paid under their previous membership. So, here’s what I am directing the Lender to do to compensate Mr and Mrs S with that being the case – whether or not a court would award such compensation: (1) The Lender should refund Mr and Mrs S’s repayments to it under the Credit Agreement, including any sums paid to settle the debt. (2) In addition to (1), the Lender should also refund the difference between Mr and Mrs S’s Fractional Club annual management charges paid after the Time of Sale and what they would have paid under their previous membership had they not purchased the Fractional Club. (3) The Lender can deduct: i. The value of any promotional giveaways (if any) that Mr and Mrs S used or took advantage of; and ii. The market value of the holidays* Mr and Mrs S took using their Fractional Club if the value of the holiday(s) taken amounted to more than they would have been entitled to use at the time of the holiday(s) under their existing membership. However, this deduction should be proportionate and relate only to the additional value of the holiday(s) in question. (I’ll refer to the output of steps 1 to 3 as the ‘Net Repayments’ hereafter) (4) Simple interest** at 8% per annum should be added to each of the Net Repayments from the date each one was made until the date the Lender settles this complaint. (5) The Lender should remove any adverse information recorded on Mr and Mrs S’s credit files in connection with the Credit Agreement reported within six years of this decision. (6) If Mr and Mrs S’s Fractional Club membership is still in place at the time of this decision, as long as they agree to hold the benefit of their interest in the Allocated Property for the Lender (or assign it to the Lender if that can be achieved), the Lender must indemnify them against all ongoing liabilities as a result of their Fractional Club membership. *I recognise that it can be difficult to reasonably and reliably determine the market value of holidays when they were taken a long time ago and might not have been available on the open market. So, if it isn’t practical or possible to determine the market value of the holidays

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Mr and Mrs S took using their Fractional Club, deducting the relevant annual management charges (that correspond to the year(s) in which one or more holidays were taken) payable under the Purchase Agreement seems to me to be a practical and proportionate alternative in order to reasonably reflect their usage. **HM Revenue & Customs may require the Lender to take off tax from this interest. If that’s the case, the Lender must give the consumer a certificate showing how much tax it’s taken off if they ask for one. My final decision I uphold this complaint, and direct Shawbrook Bank Limited to calculate and pay fair compensation to Mr and Mrs S as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs S and Mr S to accept or reject my decision before 28 April 2026. Chris Riggs Ombudsman

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