Mitsubishi HC Capital UK PLC · DRN-6264685

The complaint Mr W says Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance (the ‘Lender’) has unfairly declined his claim under section 75 of the Consumer Credit Act 1974 (‘CCA’). And he says his creditor-debtor relationship with the Lender was unfair to him under section 140A of the CCA. What happened In October 2017 (the ‘Time of Sale’), Mr W and another, who I’ll call Ms G, purchased a timeshare membership – which I’ll call ‘Fractional Club membership’ – from a timeshare provider (the ‘Supplier’). The membership was asset backed – which means it gave Mr W and Ms G more than just holiday rights. It included a share of the net sale proceeds of a property named on the purchase agreement (the ‘Allocated Property’) after the membership term ended. They ‘traded-in’ a trial membership, which left £10,890 to pay. Mr W alone borrowed £14,812 from the Lender to pay for it and to repay the balance of an earlier loan. In March 2024, Mr W – using a professional representative (‘PR’) – wrote to the Lender (the ‘Letter of Claim’) to make a claim under sections 75 and 140A of the CCA. The Lender dealt with the Letter of Claim as a complaint and issued its final response letter on 30 May 2024. It rejected the complaint on every ground. Mr W’s PR then referred the complaint to our service. It was assessed by one of our investigators who rejected the complaint on its merits. Mr W disagreed with the Investigator and asked that an ombudsman make a final decision. The legal and regulatory context When considering what is, in my opinion, fair and reasonable in all the circumstances of the complaint, I’m required by DISP 3.6.3R of the Financial Conduct Authority (‘FCA’) Handbook to take into account: ‘(1) relevant: (a) law and regulations; (b) regulators’ rules, guidance and standards; (c) codes of practice; and (2) ([when] appropriate) what [I consider] to have been good industry practice at the relevant time.’ The legal and regulatory context that’s relevant to this complaint is, in many ways, no different to that shared in several hundred decisions by ombudsmen on very similar complaints – which can be found on our website. I therefore don’t think it’s necessary to set out that context in detail here. But I’d add that the following regulatory rules/guidance are also relevant:

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• The Consumer Credit Sourcebook (‘CONC’) – also found in the FCA’s Handbook of Rules and Guidance. Below are the most relevant provisions and/or guidance as they were at the relevant time: • CONC 3.7.3R • CONC 4.5.3R • CONC 4.5.2G • 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 don’t think this complaint should be upheld. Before I explain why, I want to make it clear that my role as an ombudsman isn’t to address every single point that’s been made to date – it’s to decide what’s fair and reasonable in the circumstances of this complaint. So if I haven’t commented on, or referred to, something that either party has said, it doesn’t mean I haven’t considered it. Section 75 Section 75 of the CCA protects consumers who buy goods and services on credit. It says, if certain conditions are met, that the finance provider is legally answerable for any misrepresentation or breach of contract by the supplier. Mr W’s claim against the Lender under section 75 essentially mirrors the claim he could make against the Supplier. The Lender relied on the Limitation Act 1980 (the ‘LA’) to decline the claim under section 75. The LA sets the statutory time limits for bringing a civil claim in England and Wales. It says consumers like Mr W have six years from the date on which ‘the cause of action accrued’ (i.e. the date of the alleged misrepresentation) to make their claim, after which the other party has a complete defence. As Mr W made his section 75 claim more than six years after he and Ms G purchased their Fractional Club membership, I think the Lender had a complete defence to the claim. It follows that I don’t think it was unfair for it to decline the claim. That said, the alleged misrepresentations can also form the basis of a claim under section 140A and for which the Lender cannot rely on the LA in this case, so I’ve addressed them below.

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Section 140A Section 140A says a court may make an order if it thinks the relationship between a creditor and a debtor is unfair to the debtor. It’s deliberately framed in wide terms, and a finding of unfairness can flow from something done on the creditor’s behalf in connection with a ‘related agreement’. Here, the purchase agreement is a ‘related agreement’. And, by virtue of section 56 of the CCA, the Lender is legally answerable for the Supplier’s actions. Having considered the entirety of the relationship, I don’t think it was unfair for the purposes of section 140A. In reaching this conclusion, I’ve considered: (1) The standard of the Supplier’s commercial conduct, which includes its sales and marketing practices at the Time of Sale, and any relevant training material. (2) The information provided by the Supplier at the Time of Sale, including the contracts and any 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) All the evidence provided by both parties on what was supposedly said and/or done at the Time of Sale. (5) The inherent probabilities of what’s likely to have happened given the circumstances of the sale. Misrepresentations In the Letter of Claim, the PR said the Supplier misrepresented the Fractional Club membership by telling Mr W (and Ms G): 1. He had purchased an investment which would appreciate in value. 2. He would have a share of a property, and its value would increase during the term of the agreement. 3. He would have access to the ‘holiday apartment at any time all around the year’. 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, 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 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 the Fractional Club membership was misrepresented at the Time of Sale in this way, I don’t think it’s probable. The membership gave Mr W and Ms G ‘points’ that they could exchange for accommodation, which was obviously subject to availability; the membership didn’t give them the right to use the Allocated Property in any way during the membership term. And as there isn’t any other evidence on file to support the suggestion that the Fractional Club membership was misrepresented in this way, I don’t think it was. The Supplier’s sales and marketing practices at the Time of Sale There are several reasons why the PR says Mr W’s creditor-debtor relationship with the Lender was unfair to him.

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The PR says, for instance, that the right checks weren’t carried out before the Lender lent to Mr W. I haven’t seen anything to persuade me that this was the case in this complaint given its circumstances. But even if I were to find that the Lender failed to do everything it should have when it agreed to lend (and I make no such finding), I would have to be satisfied that the money lent to Mr W was actually unaffordable before also concluding that he lost out as a result and then consider whether the credit relationship with the Lender was unfair to him for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for the Mr W. 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 Mr W knew, amongst other things, how much he was borrowing and repaying each month, who he was borrowing from and that he was borrowing money to pay for Fractional Club membership. And as the lending doesn’t look like it was unaffordable for him, 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 a financial loss for Mr W – such that I can say that the credit relationship in question was unfair on him 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 him, even if the loan wasn’t arranged properly. Overall, therefore, I don’t think that Mr W’s credit relationship with the Lender was rendered unfair to him 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 him. And that’s the suggestion that Fractional Club membership was marketed and sold to him as an investment in breach of a prohibition against selling timeshares in that way. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender doesn’t dispute, and I’m satisfied, that Mr W’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 says a supplier must not market or sell a proposed timeshare contract as an investment. The term ‘investment’ isn’t defined in the Timeshare Regulations. But I’ll adopt the same definition that was used in R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd [2023] EWHC 1069 (Admin) (‘Shawbrook v Financial Ombudsman Service’), which says it’s a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. The Fractional Club membership clearly included an investment component in that Mr W’s share of the proceeds of the deferred sale offered the prospect of a financial return – whether or not, like all investments, that return was more, less or the same as the sum invested. But it’s important to note that the fact that the Fractional Club membership included an investment component did not, in itself, transgress the prohibition in Regulation 14(3). Regulation 14(3) prohibits the marketing or selling of a timeshare contract as an investment. It doesn’t prohibit the existence of an investment component in a timeshare contract or the marketing and/or selling of such a contract per se. In other words, the Timeshare Regulations didn’t ban products like the Fractional Club – they simply regulated how they were marketed and sold. To conclude, therefore, that the Fractional Club membership was marketed or sold to Mr W

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as an investment in breach of Regulation 14(3), I must be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to him as an investment, i.e. told him or led him to believe that Fractional Club membership offered him 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 the Fractional Club membership was marketed and/or sold by the Supplier as an investment in breach of Regulation 14(3). On the one hand, it’s clear that the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective members, such as Mr W, the financial value of their share in the net sales proceeds of the Allocated Property, along with the investment considerations, like the associated risk and reward. 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 also possible that Fractional Club membership was marketed and sold to Mr W as an investment in breach of Regulation 14(3). However, whether there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome for this complaint for reasons I’ll explain, so it’s not necessary for me to make a formal finding on this particular issue. Would the credit relationship between the Lender and Mr W have been rendered unfair to him had there been a breach of Regulation 14(3) of the Timeshare Regulations? As I think it’s possible the Supplier breached Regulation 14(3) at the time of each sale, I now need to decide what impact it might have had on the fairness of the relationship between Mr W and the Lender. I say this because in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 (‘Plevin’), the Supreme Court said: ‘Section 140A […] does not impose any obligation and is not concerned with the question whether the creditor or anyone else is in breach of a duty. It is concerned with the question whether the creditor’s relationship with the debtor was unfair.’ What this means is that a breach of Regulation 14(3) doesn’t automatically mean the credit relationship is unfair for the purposes of section 140A. Such a breach and its consequences (if there are any) must be considered in the round rather than in a narrow or technical way. For me to conclude that a breach of Regulation 14(3) led to an unfair relationship, I need to see sufficient evidence to conclude, on the balance of probabilities, that the prospect of a financial gain was an important and motivating factor for Mr W when he decided to purchase the membership. 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 he decided to go ahead with the purchase. The PR has sent us a short statement from Mr W. I appreciate that Mr W says, ‘The membership was sold as an estate investment’, but he doesn’t explain what he means by this. Nor does he explain how it was sold as an ‘estate investment’ – for example, he doesn’t say what was said or provide any colour or context. And, importantly, the thrust of his statement is that he and Ms G purchased the Fractional Club membership for the holiday rights. I say this because he specifically says: ‘We purchased the membership was they had told us we could go on holiday

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whenever we wanted, with either free accommodation or cheaper accommodation based on where we were going.’ (I think the word ‘was’ in this sentence is a typographical error – and it should say ‘as’.) In response to our investigator’s view, the PR has reiterated why it thinks the Fractional Club membership was sold as an investment. But as I accept that’s possible, I don’t think I need to say more on this point. The PR also says ‘the investment element played quite an important role in convincing [Mr W] to purchase’, and ‘was a factor in [Mr W’s] decision to purchase the [Fractional Club membership’. But it relies on the sentence from Mr W’s statement that I’ve quoted above – which refers to an ‘estate investment’ – and I don’t agree that it shows that the prospect of a financial gain was an important and motivating factor for Mr W. Finally, the PR has highlighted that under section 140B(9) of the CCA, the burden of proof falls on the Lender to disprove the allegation that its relationship with Mr W 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 Mr W to provide some evidence for the claim he is 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’s my role to make findings on what I consider to be fair and reasonable in all the circumstances of any given complaint. On balance, therefore, even if the Supplier had marketed or sold the Fractional Club membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, I am not persuaded that Mr W’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 he would have pressed ahead with his 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 Mr W and the Lender was unfair to him 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 Mr W wasn’t 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. In his witness statement, Mr W’s only reference to the ongoing costs of the membership is: ‘The maintenance fee is very expensive…’. So the PR hasn’t provided any evidence to show that the Supplier didn’t provide sufficient information about the fee at the Time of Sale. And the Supplier has provided evidence to show that the fee started at €807, rose to €826 the following year, and then stayed at €847 for three years. I appreciate that it went up to €947 for 2023, but I don’t think that’s unfair or unreasonable, and it certainly is an ‘exponential’ increase as the PR alleges. So while I accept it’s possible that the Supplier didn’t give Mr W sufficient information, in good time, on the various charges he could be subject to as a Fractional Club member, I’m not persuaded that this, alone, rendered his creditor-debtor relationship with the Lender unfair to him. The PR says that there was one or more unfair contract terms in the Purchase Agreement. But as I can’t see that any such terms were operated unfairly against Mr W in practice, nor that any such terms led them to behave in a certain way to their detriment, I’m not

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persuaded that any of the terms governing Fractional Club membership are likely to have led to an unfairness that warrants a remedy. The PR also 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. I think the Supreme Court’s judgment in Hopcraft, Johnson and Wrench sets out principles which apply to credit brokers other than car dealer-credit brokers. So when considering concerns 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 FCA’s DISP rules. However, I don’t think Hopcraft, Johnson and Wrench leads to me to conclude that Mr W’s credit relationship with the Lender was unfair to him for reasons relating to commission given the facts and circumstances of this complaint. I haven’t seen anything to suggest that the Lender and the Supplier were tied to one another contractually or commercially in a way that wasn’t properly disclosed to Mr W, nor have I

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seen anything that persuades me that the commission arrangement between them gave the Supplier a choice over the interest rate that led Mr W 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 don’t 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. So it isn’t necessary for me to make a formal finding on this because, even if the Lender and the Supplier failed to follow the relevant regulatory guidance at the time of sale, it’s for the reasons set out below that I don’t currently think any such failure is itself a reason to conclude that the credit relationship in question is unfair to Mr W. 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 Mr W entered into wasn’t high. At £592.48, it was only 4% of the amount borrowed and even less than that as a proportion of the charge for credit. So had he 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 he either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mr W wanted the Fractional Club membership and had no obvious means of his own to pay for it. And at such a low level, the impact of commission on the cost of the credit he needed for a timeshare he wanted doesn’t strike me as disproportionate. So I think Mr W would still have taken out the loan to fund the purchase 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 a timeshare. 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 express or implied – to put to one side its commercial interests in pursuit of that goal when arranging the credit agreement. And as it wasn’t acting as an agent of Mr W but as the supplier of contractual rights he 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 him when arranging the credit agreement and thus a fiduciary duty. Overall, 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 Mr W. The status of the Supplier In the Letter of Claim, the PR says the Supplier went into ‘liquidation’ in December 2020, which means Mr W won’t be able to recover any remedy from the Supplier. However, the PR hasn’t said or provided any evidence to show that Mr W’s membership has been affected as a result – so I can’t see how this could render Mr W’s relationship with the Lender unfair to him. Section 140A conclusion Given all of the factors I’ve looked at in this part of my decision, and having taken all of them into account, I’m not persuaded that the credit relationship between Mr W and the Lender

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under the credit agreement and related purchase agreement was unfair to him. And as things currently stand, I don’t think it would be fair or reasonable that I uphold this complaint on that basis. Commission: the alternative grounds of complaint While I’ve found that Mr W’s credit relationship with the Lender wasn’t unfair to him 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 Mr W’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 Mr W (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 Mr W 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 him. 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 he would still have taken out the loan to fund his purchase at the Time of Sale had there been more adequate disclosure of the commission arrangements that applied at that time. Overall conclusion In conclusion, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it declined Mr W’s section 75 claim. I am not persuaded that the Lender was party to a credit relationship with him under the credit agreement and related purchase agreement that was unfair to him 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 him. My final decision I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr W to accept or reject my decision before 28 April 2026. Christopher Reeves Ombudsman

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