Mitsubishi HC Capital UK Plc · DRN-6262903

The complaint Mrs K’s complaint is, in essence, that Mitsubishi HC Capital UK Plc trading as Novuna (the ‘Lender’) acted unfairly and unreasonably by (1) being party to unfair credit relationships with her 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 Mrs K purchased a membership of a timeshare (the ‘Fractional Club’) from a timeshare provider (the ‘Supplier’) on 18 February 2014 (the ‘Time of Sale 1’). She entered into an agreement to purchase 1830 fractional points for £4,909 plus £328 in legal and administration fees (‘Purchase Agreement 1’). To pay for this purchase, she took a loan of £5,237 from the Lender (‘Credit Agreement 1’). This loan was settled in full on 3 April 2014. On 25 September 2016 ( the ‘Time of Sale 2’), she entered into another agreement to purchase 1540 bi-annual fractional points in the ‘signature collection’ for £21,717 (‘Purchase Agreement 2’). This purchase was financed by trading in the value of a previous membership for £7,930 and taking an additional loan of £13,787 from the Lender (‘Credit Agreement 2’). Fractional Club membership was asset backed – which meant it gave Mrs K more than just holiday rights. It also included a share in the net sale proceeds of a property named on the Purchase Agreement (the ‘Allocated Property’) after her membership term ends. This complaint relates to the loans used to finance the purchase of the Fractional Club memberships on 18 February 2014 and 25 September 2016. I will consider both of these purchases in this decision. Mrs K – using a professional representative (the ‘PR’) – wrote to the Lender on 26 November 2021 (the ‘Letters 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 responded to her complaint about Credit Agreement 1 on 16 February 2023 rejecting it on the basis that there was a defence to the complaint under the Limitation Act 1980 (the ‘LA’). It said that as the complaints had been made more than six years after the date of the transactions had taken place, it believed that Mrs K had complained too late to bring complaints relating to the representations the Supplier had made during the sales processes. It also said that as Mrs K had settled the loan on 3 April 2014, any complaint about an unfair debtor-creditor relationship needed to be raised by 3 April 2020 to be valid. The Lender responded to her complaint about Credit Agreement 2 on 16 February 2023, rejecting it on all grounds. Unhappy with this, Mrs K brought her complaint to this service.

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The complaint was then assessed by an Investigator who, having considered the information on file, agreed with the Lender that Mrs K’s complaint about Credit Agreement 1 had been made too late to be considered and that her complaint about Credit Agreement 2 should not be upheld. The PR 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. I issued a provisional decision on 6 February 2026, where I explained which parts of the complaint I thought our Service could consider, and which it couldn’t. I was minded to conclude in terms of Credit Agreement 1: 1. Mrs K’s complaint about a credit relationship with the Lender that was unfair to her is not within the jurisdiction of this Service because it wasn’t made within the time limits set out in DISP 2.8.2 R (2). 2. Mrs K’s complaint about the Lender’s decision to reject her 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. In terms of Credit Agreement 2, I was minded to conclude that our Service could consider it as it had been brought in time, but that I was not minded to uphold it on its merits. I have dealt with whether our Service has jurisdiction to consider Mrs K’s complaint that the credit relationship between her and the Lender was unfair to her under Section 140A of the CCA, in a separate decision. This decision considers the merits of both Credit Agreements 1 and 2. In terms of Credit Agreement 1, I will only consider the merits of Mrs K’s complaint about the way the Lender handled her claim under Section 75 of the CCA, as I have already found that this Service does not have the jurisdiction to consider a complaint about a credit relationship with the Lender that was unfair to her because it wasn’t made within the time limits set out in DISP 2.8.2 R (2). In terms of Credit Agreement 2, I will consider Mrs K’s complaints about this Credit Agreement being unfair to her under both Section 140A and Section 75 of the CCA, as I have found that this is within my jurisdiction to consider. I will take each Credit Agreement in turn, starting with Credit Agreement 1.

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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 his 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. In this case, as the Lender refused to accept and pay Mrs K’s claim on 16 February 2023, her 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 on 24 October 2022, 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 Mrs K’s Section 75 claim. 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 K’s Section 75 claim was time-barred under the LA before she 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. The date on which the cause of action accrued was the Time of Sale 1. I say this because Mrs K entered into the purchase of her timeshare at that time based on the alleged misrepresentations of the Supplier – which she says she relied on. And as the loan from the Lender was used to help finance the purchase, it was when she entered into Credit Agreement 1 that she suffered a loss. Mrs K first notified the Lender of her Section 75 claim on 26 November 2021. And as more than six years had passed between Time of Sale 1 and when she first put her claim to the Lender, I don’t think it was unfair or unreasonable of the Lender to reject her concerns about the Supplier’s alleged misrepresentations.”

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In terms of Credit Agreement 2, in my PD 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. 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 2 because Mrs K was: 1. Told that she had purchased an investment that would “considerably appreciate in value”. 2. Promised a considerable return on her investment because she was told that she would own a share in a property that would considerably increase in value. 3. Told that she could sell her Fractional Club membership to the Supplier or easily to third parties at a profit. 4. Made to believe that she would have access to “the holiday apartment” at any time all year round. 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 any accompanying 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 points 3 and 4, while it’s possible that Fractional Club membership was misrepresented at Time of Sale 2 for one or both of those reasons, I don’t think it’s probable. They’re given little to none of the colour or context necessary to demonstrating that the Supplier made false statements 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 these reasons, I don’t think it was. So, while I recognise that Mrs K and the PR have concerns about the way in which Fractional Club membership was sold by the Supplier, when looking at the 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?

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I’ve already explained why I’m not persuaded that Fractional Club membership was actionably misrepresented by the Supplier at Time of Sale 2. But there are other aspects of the sales processes 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 K and the Lender along with all of the circumstances of the complaint, I don’t think the credit relationship between them was likely to have been rendered unfair for the purposes of Section 140A. When coming to that conclusion, and in carrying out my analysis, I have looked at: 1. The standard of the Supplier’s commercial conduct – which includes its sales and marketing practices at Time of Sale 2 along with any relevant training material; 2. The provision of information by the Supplier at Time of Sale 2, including the contractual documentation and disclaimers made by the Supplier; 3. The commission arrangements between the Lender and the Supplier at Time of Sale 2 and the disclosure of those arrangements; 4. Evidence provided by both parties on what was likely to have been said and/or done at Time of Sale 2; 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 relevant credit relationship between Mrs K and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mrs K’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 K. 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 K was actually unaffordable before also concluding that she lost out as a result and then consider whether the credit relationship with the Lender was unfair to her for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mrs K. Connected to this is the suggestion by the PR that Credit Agreement 2 was 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 Mrs K knew, amongst other things, how much she was borrowing and repaying each month, who she was borrowing from and that she was borrowing money to pay for Fractional Club membership. And as none of the lending looks like it was unaffordable for her, even if Credit Agreement 2 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 K’s financial loss – such that I can say that the credit relationship in question was unfair on her 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 her, even if the loans weren’t arranged properly. The PR also says that there was one or more unfair contract terms in Purchase Agreement 2. But as I can’t see that any such terms were operated unfairly against Mrs K in practice, nor that any such terms led her to behave in a certain way to her 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.

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I acknowledge that Mrs K may have felt weary after sales processes that went on for a long time. But she says little about what was said and/or done by the Supplier during the sales presentations that made her feel as if they had. She was also given a 14-day cooling off period and she has not provided a credible explanation for why she did not cancel her membership during that time. And with all of that being the case, there is insufficient evidence to demonstrate that Mrs K made the decision to purchase Fractional Club membership because her ability to exercise that choice was significantly impaired by pressure from the Supplier. Overall, therefore, I don’t think that Mrs K’s credit relationship with the Lender was rendered unfair to her under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR says the credit relationship in relation to Credit Agreement 2 with the Lender was unfair to her. And that’s the suggestion that Fractional Club membership was marketed and sold to her 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 The Lender does not dispute, and I am satisfied, that Mrs K’s Fractional Club membership met the definition of a “timeshare contract” and was a “regulated contract” for the purposes of the Timeshare Regulations. Regulation 14(3) of the Timeshare Regulations prohibited the Supplier from marketing or selling Fractional Club membership as an investment. This is what the provision said at the Time of Sale 2: “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 2 – saying, in summary, that Mrs K was 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 Mrs K the prospect of a financial return – whether or not, like all investments, that was more than what she 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 K as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to her as an investment, i.e. told her or led her to believe that Fractional Club membership offered her the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint.

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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 K, 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 Mrs K as an investment in breach of Regulation 14(3). 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 2, I now need to consider what impact such breaches had on the fairness of the credit relationship between Mrs K and the Lender under Credit Agreement 2 and the 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 K and the Lender that were unfair to her and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led her to enter into Purchase Agreement 2 and Credit Agreement 2 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 Mrs K decided to go ahead with her purchase. Mrs K provided a statement to PR, which was then forwarded to us. This was dated 9 May 2024. Mrs K purchased the fractional membership in September 2016, but didn’t complain until November 2021, over five years after the sale. She didn’t provide any of her own memories of the sale until May 2024, so approaching eight 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 Mrs K’s experience of the sales process, together with her disappointment with the limited availability she discovered when trying to book holidays. On the subject of the investment element of the membership, the statement made little reference to the role this played in Mrs K’s purchase decision, saying:

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“We were told by the salesperson that, if we bought the fractional property, at the end of the contract (31/12/2032) we could sell our share of the property and potentially make a decent profit due to the increase in the value of the property. It was sold to us as an investment, rather like having a share in a second home, with the prospect of a cash windfall at the end of its term. We believed this to be a win-win situation – great holidays for us and the family then at least our money back, even if there was no profit, at the end of the contract. We believed we had nothing to lose.” From this, I consider that Mrs K had an understanding of how the fractional membership gave her a share in the allocated property. I also consider that she had been made aware by the Supplier that the value of the fractional membership was linked to the value of the property and would rise and fall in line with this value. When assessing the witness statement, I also have to consider that neither Mrs K or her PR provided any evidence about what took place at the sales presentation prior to this witness statement, and it was only after the investigator issued their view, and 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 K recalled that the Supplier led her to believe that Fractional Club membership offered her the prospect of a financial gain. As I mentioned above, I consider that the more time that passes between a complaint and the event complained about, the more risk there is of recollections being vague, inaccurate and/or influenced by discussion with others, I find it difficult to understand why the Financial Ombudsman Service was only given such evidence when it was. Indeed, as there isn’t any other evidence on file to corroborate Mrs K’s more recent evidence about her motivations at Time of Sale 2, there seems to me to be a very real risk that her recollections were coloured by the judgment in Shawbrook & BPF v FOS. 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 Mrs K wasn’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 Mrs K herself doesn’t persuade me that her purchase was motivated by her share 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 decision Mrs K 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 K ‘s decision to purchase Fractional Club membership at the Time of Sale were motivated by the prospect of a financial gain (i.e., a profit). On the contrary, I think the evidence suggests she would have pressed ahead with her purchase whether or not there had been a breach of Regulation 14(3). And for that reason, I do not think the credit relationship between Mrs K and the Lender were unfair to her even if the Supplier had breached Regulation 14(3). The Supplier’s liquidation procedure and the applicability of Spanish Law on the Credit Agreement

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The PR has indicated that any amounts that may be awarded in compensation against the Supplier as a result of action in a Spanish Court may not be recoverable owing to the liquidation of the Supplier’s sales companies. I am unconvinced that the liquidation of these companies has any bearing on the merits of the complaint against the Lender. Furthermore, I can’t see that the Lender has been party to any court proceedings in Spain. Given that, and also noting that the Purchase Agreement is governed by English law, it isn’t at all clear to me that Spanish law would be held relevant if the validity of the Purchase Agreement were litigated between its parties and the Lender in an English court. For example, in Diamond Resorts Europe and Others (Case C-632/21), the European Court of Justice ruled that, because the claimant lived in England and the timeshare contract governed by English law, it was English law that applied, not Spanish. Overall, therefore, in the absence of a successful English court ruling on a timeshare case paid for using a point-of-sale loan on similar facts to this complaint, and given the facts and circumstances of this complaint, I’m not persuaded that it would be fair or reasonable to consider the liquidation of any of the Supplier’s sales companies is relevant to this complaint. Conclusion In conclusion, as things currently stand, I do not think that the Lender acted unfairly or unreasonably when it dealt with the relevant Section 75 claims, and I am not persuaded that the Lender was party to credit relationships with Mrs K under the Credit Agreement 2 that was unfair to her for the purposes of Section 140A of the CCA – nor do I see any other reason why it would be fair or reasonable to direct the Lender to compensate her.” I asked both Mrs K 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. The PR also responded – they did not accept the PD and provided some further comments and evidence they wish to be considered. Having received the relevant responses from both parties, I’m now finalising my decision. As set out above, this decision addresses the merits of Mrs K’s complaint about the Lender’s handling of her Section 75 claim in relation to Credit Agreement 1 and both Section 140A and Section 75 claims in terms of Credit Agreement 2. 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: For Credit Agreement 1: The Office of Fair Trading’s Irresponsible Lending Guidance – 31 March 2010

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The primary purpose of this guidance was to provide greater clarity for businesses and 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 For Credit Agreement 2: 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 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. 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. Looking first at Credit Agreement 1, as neither Mrs K nor the Lender provided any further information following my provisional decision, I can see no reason to alter my view.

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Consequently, for the reasons given in my PD, I don’t think it was unfair for the Lender to reject the complaint under Section 75 for Credit Agreement 1. I will now turn to consider Credit Agreement 2. 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 K and the Lender was unfair. In particular, the PR has provided further comments in relation to whether the membership was sold to Mrs K as an investment at the Time of Sale 2. They’ve 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 they didn’t make any further comments in relation to those in their response to my PD. Indeed, they haven’t said they disagree 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 Supplier’s alleged breach of Regulation 14(3) of the Timeshare regulations The PR explained in their response to my PD that they hadn’t shared the Investigator’s view on this complaint with Mrs K, saying “this was done in order not to influence their recollections”. The PR said this means Mrs K’s recollections have not been influenced by either the Investigator’s view or the judgment in Shawbrook & BPF v FOS. When assessing the witness statement, I also have to consider that neither Mrs K nor their PR provided any evidence about what took place at the sales presentation prior to this witness statement, and 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 K recalled that the Supplier led her to believe that Fractional Club membership offered her the prospect of a financial gain. As I mentioned above, I consider that the more time that passes between a complaint and the event complained about, the more risk there is of recollections being vague, inaccurate and/or influenced by discussion with others. I find it difficult to understand why the Financial Ombudsman Service was only given such evidence when it was.

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Indeed, as there isn’t any other evidence on file to corroborate Mrs K’s more recent evidence about her motivations at Time of Sale 2, there seems to me to be a very real risk that her recollections were coloured by the judgment in Shawbrook & BPF v FOS. 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. Part of my assessment of the testimony was to consider when it 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 FOS. I have thought about what the PR has said, but on balance, I don’t find it a credible explanation of the contents of Mrs K’s evidence. So, I maintain that there is a risk that Mrs K’s testimony was coloured by the outcome in Shawbrook & BPF v FOS. 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 K’s purchasing decisions. 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, as I said before, even if the Supplier had marketed or sold the membership as an investment in breach of Regulation 14(3) (which I still make no finding on here), I’m not persuaded Mrs K’s decision to make the purchase was motivated by the prospect of a financial gain. So, I still don’t think the credit relationship between Mrs K and the Lender was unfair to her for this reason. The provision of information by the Supplier at the Time of Sale 2 The PR said in response to my provisional decision that a payment of commission from the Lender to the Supplier at the Time of Sale 2 should lead me to uphold this complaint because, simply put, information in relation to that payment went undisclosed at the Time of Sale 2. 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.

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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 K 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 K, nor have I seen anything that persuades me that the commission arrangement between them gave the Supplier a choice over the interest rate that led Mrs K into a credit agreement that cost disproportionately more than it otherwise could have. I acknowledge that it’s possible that the Lender and the Supplier failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. But as I’ve said before, the case law on Section 140A makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. And with that being the case, it isn’t necessary to make a formal finding on that because, even if the Lender and the Supplier failed to follow the

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relevant regulatory guidance at the Time of Sale 2, it is for the reasons set out below that I don’t currently think any such failure is itself a reason to find the credit relationship in question unfair to Mrs K. In stark contrast to the facts of Mr Johnson’s case, the amount of commission paid by the Lender to the Supplier for arranging Credit Agreement 2 that Mrs K entered into wasn’t high. At £125.46, it was only 0.91% of the amount borrowed and less than that (0.84%) as a proportion of the charge for credit. So, had she known at the Time of Sale 2 that the Supplier was going to be paid a flat rate of commission at that level, I’m not currently persuaded that she either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mrs K wanted Fractional Club membership and had no obvious means of her own to pay for it. And at such a low level, the impact of commission on the cost of the credit she needed for a timeshare she wanted doesn’t strike me as disproportionate. So, I think she would still have taken out the loan to fund her purchase at the Time of Sale 2 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 K but as the supplier of contractual rights she obtained under the Purchase Agreement 2, the transaction doesn’t strike me as one with features that suggest the Supplier had an obligation of ‘loyalty’ to her when arranging the Credit Agreement 2 and thus a fiduciary duty. Overall, therefore, I’m not currently persuaded that the commission arrangements between the Supplier and the Lender were likely to have led to a sufficiently extreme inequality of knowledge that rendered the credit relationship unfair to Mrs K. Commission: The Alternative Grounds of Complaint While I’ve found that Mrs K’s credit relationships with the Lender were not unfair to her for reasons relating to the commission arrangements between it and the Supplier, two of the grounds on which I came to that conclusion also constitute separate and freestanding complaints to Mrs K’s complaint about an unfair credit relationship. So, for completeness, I’ve considered those grounds on that basis here. The first ground relates to whether the Lender is liable for the dishonest assistance of a breach of fiduciary duty by the Supplier because it took a payment of commission from the Lender without telling Mrs K (i.e., secretly). And the second relates to the Lender’s compliance with the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. However, for the reasons I set out above, I’m not persuaded that the Supplier – when acting as credit broker – owed Mrs K a fiduciary duty. So, the remedies that might be available at law in relation to the payment of secret commission aren’t, in my view, available to her. And while it’s possible that the Lender failed to follow the regulatory guidance in place at the Time of Sale 2 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 Mrs K would still have taken out the loan to fund his purchase at the Time of Sales had there been more adequate disclosure of the commission arrangement that applied at that time. Other points

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Here, the PR has asked us to determine the rights and obligations of the Lender based on the outcome of a court case in Spain. In my PD, I said that in the absence of a judgment in an English jurisdiction on this issue, I was not persuaded it was fair and reasonable to conclude the loan agreement was able to be set aside. I remain of this view for the following reasons: • The Lender wasn’t a party to the proceedings the PR has referred to, so its’ rights under the Credit Agreements have not been determined. • I still think that the Purchase Agreements are governed by English law for the reasons already set out in my PD. The PR has pointed to a different decision of the European Court of Justice that points the other way. But in the absence of any authorities under English law, I’m still not persuaded that (1) the Purchase Agreements, properly governed by English law, could be avoided following the Spanish Judgment to which the PR refers and (2) that the Credit Agreements were also something that could be successfully avoided. So again, I’m still not persuaded that it would be fair or reasonable to uphold the complaint for this reason. Conclusion In conclusion, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mrs K’s Section 75 claim in relation to Credit Agreement 1. I am also not persuaded that the Lender was party to a credit relationship with her under Credit Agreement 2 that was unfair to her for the purposes of either Section 75 or 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 her. 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 Mrs K to accept or reject my decision before 27 April 2026. Bill Catchpole Ombudsman

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