DRN-6311707

The complaint Mrs and Mr R’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 Mrs and Mr R were the members of a timeshare provider (the ‘Supplier’) – having purchased a trial membership from it previously. 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 22 November 2018 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy 1,540 fractional points at a cost of £18,699.00 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Mrs and Mr R 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 and Mr R paid for their Fractional Club membership by taking finance of £22,673.00 from the Lender (the ‘Credit Agreement’) consolidating some outstanding finance. Mrs and Mr R – using a professional representative (the ‘PR’) – wrote to the Lender on 11 January 2023 (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 and Mr R’s concerns as a complaint and issued its final response letter on 17 April 2024, 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, rejected the complaint on its merits. Mrs and Mr R disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. I considered the matter and issued a provisional decision (the ‘PD’). In that decision, I said: Section 75 of the CCA: the Supplier’s misrepresentations at the Time of Sale 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.

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Certain conditions must be met if the protection afforded to consumers is engaged, including, for instance, the cash price of the purchase and the nature of the arrangements between the parties involved in the transaction. The Lender doesn’t dispute that the relevant conditions are met. But for reasons I’ll come on to below, it isn’t necessary to make any formal findings on them here. It was said in the Letter of Complaint that Fractional Club membership had been misrepresented by the Supplier at the Time of Sale because Mrs and Mr R were: 1. Told that they had purchased an investment that would “considerably appreciate in value” when that was not true. 2. Told that they would own a share in a property that would increase in value during the membership term when that was not true. 3. Made to believe that they would have access to “the holiday apartment” at any time all year round when that was not true. However, neither points 1 nor 2 strike me as misrepresentations even if such representations had been made by the Supplier (which I make no formal finding on). 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. And even if the Supplier’s sales representatives went further and suggested that the share in question would increase in value, perhaps considerably so, that sounds like nothing more than a honestly held opinion as there isn’t enough evidence to persuade me that the relevant sales representative(s) said something that, while an opinion, amounted to a statement of fact that they did not hold or could not have reasonably held. As for point 3, while it’s possible that Fractional Club membership was misrepresented at the Time of Sale for that reason, I don’t think it’s probable. It’s given little to none of the colour or context necessary to demonstrating that the Supplier made a false statement of existing fact and/or opinion. And as there isn’t any other evidence on file to support the suggestion that Fractional Club membership was misrepresented for that reason, I don’t think it was. So, while I recognise that Mrs and Mr R and the PR have concerns about the way in which Fractional Club membership was sold by the Supplier, when looking at the claim under Section 75 of the CCA, I can only consider whether there was a factual and material misrepresentation by the Supplier. For the reasons I’ve set out above, I’m not persuaded that there was. And that means that I don’t think that the Lender acted unreasonably or unfairly when it dealt with this particular Section 75 claim. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that Fractional Club membership was actionably misrepresented by the Supplier at the Time of Sale. But there are 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. Having considered the entirety of the credit relationship between Mrs and Mr R 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 in relation to

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Fractional Club membership, 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 Time of Sale; 5. The inherent probabilities of the sale given its circumstances; and, when relevant 6. Any existing unfairness from a related credit agreement. I have then considered the impact of these on the fairness of the credit relationship between Mrs and Mr R and the Lender given their circumstances at the Time of Sale. The Supplier’s sales & marketing practices at the Time of Sale Mrs and Mr R’s complaint about the Lender being party to an unfair credit relationship was made for several reasons. The PR says, for instance, that the right checks weren’t carried out before the Lender lent to Mrs and Mr R. 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 Mrs and Mr R 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 the Mrs and Mr R. Connected to this is the suggestion by the PR that the Credit Agreement was arranged by an unauthorised credit broker, the upshot of which is to suggest that the Lender wasn’t permitted to enforce the Credit Agreement. However, it looks to me like Mrs and Mr R 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 the lending doesn’t look like it was unaffordable for them, even if the Credit Agreement was 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 Mrs and Mr R financial loss – such that I can say that the credit relationship in question was 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 loan wasn’t arranged properly. I acknowledge that Mrs and Mr R 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 Mrs and Mr R 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 Mrs and Mr R credit relationship with the Lender 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.

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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 Mrs and Mr R’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 Mrs and Mr R 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. A share in the Allocated Property clearly constituted an investment as it offered Mrs and Mr R 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 Mrs and Mr R 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 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 Mrs and Mr R, 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. 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 Mrs and Mr R 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. Was the credit relationship 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 that breach had on the fairness of the credit relationship between Mrs and Mr R 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 Mrs and Mr R 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. On my reading of the evidence before me, the prospect of a financial gain from the Fractional Club membership was not an important and motivating factor when Mrs and Mr R made the decision to purchase it. 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 I’m conscious that the original Letter of Complaint is silent about why Mrs and Mr R decided to purchase the Fractional Club membership. The submissions at that point focused on the use of the term ‘investment’. It was not until 14 October 2024 that the PR provided Mrs and Mr R’s brief statement to this service. The statement is signed and dated by Mr and Mrs R on 7 October 2024. What they say in relation to the issue of investment is this; We were told quite clearly and on more than one occasion during the day that this was not only the opportunity to purchase a luxury holiday product but that in buying a “small share” in a property it was an investment opportunity as well. We were also given a tour of the CLC site in Spain and at one point the CLC representative stopped the car and pointed at an estate of houses and said words to the effect “the property you would be buying into, is in that area over there” he then re-emphasised the investment opportunity and that it would be something our kids could use possibly inherit and that property prices would always go up, so there would be the opportunity to make money on the deal when we chose to sell our share. To my mind this is a very limited recollection of what the Supplier told them surrounding the issue of investment. And of course I must take note that this recollection is made some six years after their purchase, which leads me to conclude that there is a considerable risk of their recollections being vague, inaccurate and/or influenced by discussion with others. It is also difficult to understand why this service was only given their witness statement when it was and why there was no reference to these issues now raised in the PR’s initial Letter of Complaint to the Lender.

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I am also concerned that it was only after the judgment in 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) (‘Shawbrook & BPF v FOS’) was handed down, that Mrs and Mr R’s statement was prepared indicating that the Supplier led them to believe that Fractional Club membership offered them the prospect of a financial gain. Indeed, as there isn’t any other evidence on file to corroborate Mrs and Mr R’s evidence about their motivations at the Time of Sale, there seems to me to be a very real risk that their recollections were coloured by the judgment in Shawbrook & BPF v FOS. With this being the case, I’m not persuaded that I can give their written recollections the weight necessary to make a finding that the credit relationship in question was unfair for reasons relating to a breach of the relevant prohibition. It seems more likely they made the Fractional Club purchase for the holidays the membership could provide to them, having had a trial membership previously. As Mrs and Mr R 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, I am not persuaded that Mrs and Mr R’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 and Mr R and the Lender was unfair to them 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 Mrs and Mr R were not given sufficient information at the Time of Sale by the Supplier about the ongoing costs of Fractional Club membership. The PR also says that the contractual terms governing the ongoing costs of membership and the consequences of not meeting those costs were unfair contract terms. 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. I acknowledge that it is also possible that the Supplier did not give Mrs and Mr R sufficient information, in good time, on the various charges they could have been subject to as Fractional Club members in order to satisfy the requirements of Regulation 12 of the Timeshare Regulations (which was concerned with the provision of ‘key information’). But even if that was the case, I cannot see that the ongoing costs of membership were applied unfairly in practice. And as neither Mrs and Mr R nor the PR have persuaded me that they would not have pressed ahead with their purchase had the finer details of the Fractional Club’s ongoing costs been disclosed by the Supplier in compliance with Regulation 12, I cannot see why any failings in that regard are likely to be material to the outcome of this complaint given its fact and circumstances.

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As for the PR’s argument that there were one or more unfair contract terms in the Purchase Agreement, I can’t see that any such terms were operated unfairly against Mrs and Mr R in practice, nor that any such terms led them to behave in a certain way to their detriment. And with that being the case, 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. The effect of the Supplier entering liquidation PR says the sales companies of the Supplier started liquidation proceedings in December 2020 and this has deprived Mrs and Mr R of the opportunity to recover monies through the Spanish Court. But PR hasn’t explained why this is relevant to the complaint about the Lender. In any event, it is unclear how this action could have resulted in any unfairness in the relationship between Mrs and Mr R and the Lender. In conclusion, given the facts and circumstances of this complaint, I did not think that the Lender acted unfairly or unreasonably when it dealt with Mrs and Mr R’s Section 75 claim, and I was not persuaded that the Lender was party to a credit relationship with them under the Credit Agreement that was unfair to them for the purposes of Section 140A of the CCA. And having taken everything into account, I could see no other reason why it would be fair or reasonable to direct the Lender to compensate them. The Lender responded to the PD and accepted it. The PR also responded but did not accept the PD and provided some further comments it wanted me to take into account. Having received the relevant responses from both parties, I’m now finalising my 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 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. But I would add that the following regulatory rules/guidance are also relevant: The Consumer Credit Sourcebook (‘CONC’) – Found in the Financial Conduct Authority’s (the ‘FCA’) Handbook of Rules and Guidance Below are the most relevant provisions and/or guidance as they were at the relevant time: • CONC 3.7.3 [R] • CONC 4.5.3 [R] • CONC 4.5.2 [G] The FCA’s Principles

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The rules on consumer credit sit alongside the wider obligations of firms, such as the Principles for Businesses (‘PRIN’). Set out below are those that are most relevant to this complaint: • Principle 6 • Principle 7 • Principle 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. Following the responses from both parties, I’ve considered the case afresh and having done so, I’ve reached the same decision as that which I outlined in my provisional findings, for broadly the same reasons. Again, my role as an Ombudsman isn’t to address every single point which has been made to date, but to decide what is fair and reasonable in the circumstances of this complaint. If I haven’t commented on, or referred to, something that either party has said, this doesn’t mean I haven’t considered it. Rather, I’ve focused here on addressing what I consider to be the key issues in deciding this complaint and explaining the reasons for reaching my final decision. The PR’s further comments in response to the PD in the main relate to the issue of whether the credit relationship between Mrs and Mr R and the Lender was unfair. In particular, the PR has provided further comments in relation to whether the membership was sold to Mrs and Mr R as an investment at the Time of Sale. It has also now argued for the first time that the payment of a commission by the Lender to the Supplier led to an unfair credit relationship. As outlined in my PD, the PR originally raised various other points of complaint, all of which I addressed at that time. But it didn’t make any further comments in relation to those in their response to my PD. Indeed, it hasn’t said it disagrees with any of my provisional conclusions in relation to those other points. And since I haven’t been provided with anything more in relation to those other points by either party, I see no reason to change my conclusions in relation to them as set out in my PD. So, I’ll focus here on the PR’s points raised in response. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? The PR has highlighted under Section 140B (9) of the CCA, the burden of proof falls on the Lender to disprove the allegation that its relationship with Mrs and Mr R was unfair. I agree that this is correct, placing a burden on lenders during the process of litigation. That does not mean, though, that the Lender – or I – should take a claim at face value. There remains an onus on Mrs and Mr R to provide some evidence for the claim they are making, despite the overall burden of proof resting with the Lender, as was set out in the judgment in Smith and another v Royal Bank of Scotland plc [2023] UKSC 34 at paragraph 40. I also remind both parties that it is my role to make findings on what I consider to be fair and reasonable in all the circumstances of any given complaint. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare regulations

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In its response to my PD, the PR has reasserted its view that the Supplier marketed the Fractional Club membership to Mrs and Mr R as an investment and that this was a motivating factor in their decision. I accepted in my PD that the membership may well have been marketed as an investment to Mrs and Mr R in breach of the prohibition in Regulation 14(3) of the Timeshare Regulations. I also explained that while the Supplier’s sales processes left open the possibility that the sales representative may have positioned Fractional Club membership as an investment, it wasn’t necessary for me to make a finding on this as it is not determinative of the outcome of the complaint. I explained that regulatory breaches do not automatically create unfairness and that such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. The PR’s response to my PD hasn’t changed my view of this, and so whether the Supplier’s breach of Regulation 14(3) led Mrs and Mr R to enter into the Purchase Agreement and the Credit Agreement remains an important consideration. In my PD I explained the reasons why I didn’t think any breach of Regulation 14(3) had led Mrs and Mr R to proceed with their purchase. In short, I was not persuaded that their decision was motivated by the prospect of a financial gain (i.e., a profit). In reaching that view, I took into account the testimony given by Mrs and Mr R in the course of their complaint. I recognise the PR has interpreted Mrs and Mr R’S testimony differently to how I have, and I have carefully considered its further comments. Ultimately though, they have not led me to a different conclusion. As I explained in my PD, the PR’s original Letter of Complaint makes no specific assertion about why Mrs and Mr R decided to purchase the Fractional Club membership. What Mrs and Mr R said about investment in their written statement is extremely limited. They said that, We were told quite clearly and on more than one occasion during the day that this was not only the opportunity to purchase a luxury holiday product but that in buying a “small share” in a property it was an investment opportunity as well. We were also given a tour of the CLC site in Spain and at one point the CLC representative stopped the car and pointed at an estate of houses and said words to the effect “the property you would be buying into, is in that area over there” he then re-emphasised the investment opportunity and that it would be something our kids could use possibly inherit and that property prices would always go up, so there would be the opportunity to make money on the deal when we chose to sell our share. When I consider what Mrs and Mr R have said about their reasons for the purchase of their membership, I note that this is a somewhat limited recollection, lacking in the detail one might expect to see from a person parting with a not insignificant sum for what they claim to be for investment purposes. It would be reasonable to expect to see more evidence of what Mrs and Mr R asked of the salesperson about their purchase in terms of investment and how they scrutinised or evaluated the information they were given, but here there is no such detail, it is simply vague and generic. And whilst I accept Mrs and Mr R have said they were told that the purchase was an investment opportunity and they were buying a small share in a property, and that there was inheritance potential, this isn’t the test. I would need to be persuaded that what they were told was material to their purchasing decision i.e. they would not have bought it were it not for the Supplier’s breach of Regulation 14(3).

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I have noted the PR’s further comments suggesting I have chosen disproportionate weight on the timing and phrasing of Mrs and Mr R’s recollections, but I am afraid I must disagree. When Mrs and Mr R’s statement is read in its entirety, it is striking how little evidence they actually give. Part of my assessment of the testimony was to consider when their statement was written, and whether it may have been affected by external factors such as the widespread publication of the outcome of Shawbrook and BPF v FOS1. Mrs and Mr R’s statement is typed signed and dated by them on 7 October 2024, which is well after the outcome in Shawbrook & BPF v FOS. And their complaint to the Lender was made on 11 January 2023 at which time no mention was made of any issues surrounding investment. The timing of this statement does therefore concern me as it was prepared after the above judgment was handed down. The significance of this is that there is a likelihood that Mrs and Mr R’s recollections that the Supplier led them to believe that Fractional Club membership offered them the prospect of a financial gain were influenced by this judgment. My concern stems from the fact that experience tells me that, the more time that passes between a complaint and the event complained about, and here there has been around six years, the more risk there is of recollections being vague, inaccurate and/or influenced by discussion with others. The way in which the evidence has been provided makes me conclude that I must be very cautious as to the weight I can assign to it. The PR also objects to the approach I’ve taken in assessing this aspect of the complaint, believing that I have detracted from the judgment in Shawbrook & BPF v FOS and the case law that contributed to it, by requiring Mrs and Mr R to have been “primarily or mainly motivated” by the investment element in order to uphold the complaint. But I did not make such a finding. I said that, in my view, Mrs and Mr R would, on balance, have pressed ahead with their purchase of the Fractional Club membership even if there had been a breach of Regulation 14(3). So, ultimately, for the above reasons, along with those I already explained in my PD, I remain unpersuaded that any breach of Regulation 14(3) was material to Mrs and Mr R’s purchasing decision. The PR also said that in the judgment handed down in Shawbrook & BPF v FOS, it was not challenged that the product in question was marketed and sold as an investment. But, as I explained in my provisional decision, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. And the judgment referred to did not make a blanket finding that all such products were mis-sold in the way the PR appears to be suggesting. Any complaint needs to be considered in the light of its specific circumstances. So for the reasons given in my PD and above, I still do not think that any breach of Regulation 14(3), if there was one, was material to Mrs and Mr R’s decision to purchase the Fractional Club membership. The provision of information by the Supplier at the Time of Sale 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) (‘Shawbrook & BPF v FOS’).

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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; 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 and Mr R in arguing that their credit relationship with the Lender was unfair to them for reasons relating to commission given the facts and circumstances of this complaint. 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 and Mr R, 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 and Mr R into a credit agreement that cost disproportionately more than it otherwise could have.

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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 think any such failure is itself a reason to find the credit relationship in question unfair to Mrs and Mr R. 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 and Mr R entered into wasn’t high. At £1,133.65, it was only 5% of the amount borrowed and 7.42% as a proportion of the charge for credit. So, had they 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 they either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mrs and Mr R 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 they would still have taken out the loan to fund their purchase at the Time of Sale had the amount of commission been disclosed. 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 Mrs and Mr R 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 them when arranging the Credit Agreement and thus a fiduciary duty. Overall, therefore, I’m not 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 and Mr R. S140A 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 and Mr R and the Lender under the Credit Agreement and related Purchase Agreement was unfair to them. So, I don’t think it is fair or reasonable that I uphold this complaint on that basis. Commission: The Alternative Grounds of Complaint While I’ve found that Mrs and Mr R’s credit relationship with the Lender wasn’t unfair to them 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

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complaints to Mrs and Mr R’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 and Mr R (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 and Mr R 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 them. 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 they 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. 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 and Mr R’s Section 75 claim, and I am not persuaded that the Lender was party to a credit relationship with them under the Credit Agreement that was unfair to them 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 them. My final decision For the reasons set out above, I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr R and Mrs R to accept or reject my decision before 21 May 2026. Jonathan Willis Ombudsman

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