Shawbrook Bank Ltd · DRN-6177557

The complaint Mr B and Mrs R are assisted in bringing their complaint by “S”, a third-party professional representative. The complaint is, in essence, that Shawbrook Bank Ltd has acted unfairly and unreasonably by being party to an unfair credit relationship with them under section 140A of the Consumer Credit Act 1974 (as amended) (the “CCA”). Background to this decision I recently issued my provisional decision setting out the events leading up to this complaint and my intended conclusions. I’ve reproduced my provisional decision here and it is incorporated as part of my overall findings. I invited both parties to let me have any further comments they wished to make in response, which I will address later in this decision. My provisional decision Mr B and Mrs R were members of the Fractional Property Owners Club operated by “C”, a timeshare provider. In November 2019 (the “Time of Sale”) Mr B and Mrs R attended one of C’s sales presentations. After discussing things with the sales representative they purchased membership of C’s Holiday Owners Club. The Holiday Owners Club membership arrangements were set out on Mr B and Mrs R’s agreement with C (the “Purchase Agreement”). The Purchase Agreement bought Mr B and Mrs R 2,050 points at a cost of £29,653. Mr B and Mrs R’s existing membership was ‘traded-in’, leaving a balance of £12,753. This was funded by a loan in Mr B and Mrs R’s names provided by Shawbrook Bank (the “Credit Agreement”). On behalf of Mr B and Mrs R, S wrote to Shawbrook Bank on 4 December 2024 (the “Letter of Complaint”) to complain about failings on C’s part at the Time of Sale for which S believed Shawbrook Bank held responsibility, including failing to give them important information relevant to their decision to purchase Holiday Owners Club membership. In summary, referencing what it considered to be relevant case law, S expressed Mr B and Mrs R’s concerns as: • C breached the disinterested duty it owed them under common law in circumstances where a secret commission was paid by Shawbrook Bank to C. • C breached its fiduciary duty to them by failing to obtain their fully informed consent to the payment of commission. • for a number of reasons relating to omission and/or concealment, Shawbrook Bank was party to an unfair credit relationship with them under the Credit Agreement and related Purchase Agreement for the purposes of section 140A of the CCA. These are listed in the Letter of Complaint under the sub- headings Security, Valuation, Ownership, Asset, and Agreement. The Letter of Complaint said that in light of the concerns expressed, under the section 56 deemed agency provisions of the CCA, Shawbrook Bank should rescind the arrangements and was liable to compensate Mr B and Mrs R.

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Shawbrook Bank didn’t accept Mr B and Mrs R’s complaint and it was referred to us. The complaint was assessed by an investigator. She found there was no commission paid by Shawbrook Bank to C in relation to Mr B and Mrs R’s purchase. And she didn’t think any of the circumstances averred in the complaint correspondence were such that they gave rise to an unfair credit relationship between Mr B and Mrs R and Shawbrook Bank. S, responding on behalf of Mr B and Mrs R, disagreed with the investigator’s assessment. It asked for an ombudsman to review and determine matters. What I’ve provisionally 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. After careful consideration, I’ve taken a similar view as our investigator, in that I’m not minded to uphold Mr B and Mrs R’s complaint. I’ll explain why. The concerns over commission arrangements between Shawbrook Bank and C in relation to Mr B and Mrs R’s Credit Agreement The Letter of Complaint places much of its arguments on concerns over non- disclosure of commission payments. The prospect of any success of those arguments is founded upon the existence of commission payments between Shawbrook Bank and C in relation to the Credit Agreement entered into by Mr B and Mrs R. In its final response, Shawbrook Bank informed S that there was no commission paid in relation to the Credit Agreement. Shawbrook Bank has also provided us with evidence that there was no payment of commission to the Supplier for arranging Mr B and Mrs R’s Credit Agreement. S is aware of this position, and has not provided any evidence of such payments that would lead me to reach a different conclusion. Like our investigator, therefore, I can’t see that any of the arguments S has made around a failure to disclose that fact could possibly succeed, particularly as it can’t be shown that Mr B and Mrs R would have made a different decision about whether to take out the loan had they known there was no commission. Section 140A: did Shawbrook Bank participate in an unfair credit relationship for reasons cited other than relating to commission? I’ve explained why I’m not upholding Mr B and Mrs R’s arguments in relation to commission payments. But Mr B and Mrs R also make arguments that the credit relationship between them and Shawbrook Bank was unfair under section 140A of the CCA, when looking at all the circumstances of the case, including C’s representations or omissions at the Time of Sale. Under section 140A, a debtor-creditor relationship can be found to have been or be unfair to the debtor because of one or more of the following: the terms of the credit agreement itself; how the creditor exercised or enforced its rights under the agreement; and any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).

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Such a finding may also be based on the terms of any related agreement (which here, includes the Purchase Agreement) and on anything done or not done by the supplier on the creditor’s behalf before the making of the credit agreement or any related agreement. With this in mind I’ve considered the entirety of the credit relationship between Mr B and Mrs R and Shawbrook Bank along with all of the circumstances of the complaint. Having done so, I don’t think the credit relationship between them was likely to have been rendered unfair for section 140A purposes. S (on behalf of Mr B and Mrs R) complained about Shawbrook Bank being party to an unfair credit relationship for several reasons, which I’ve previously summarised in this decision. S’s submissions in this respect are that: 1. Mr B and Mrs R were not given the title deeds to the property in which they acquired a fractional share. 2. C represented to Mr B and Mrs R that they would get “money back” following the sale of the property at the end of the term, so it is an implied term of the contract that they would not suffer a loss. 3. C either knew the value or was reckless as to the true value sold more shares in the property than it was worth, so in effect, Mr B and Mrs R’s interest in the sales proceeds was worth less than they thought it was. 4. the fractional product is referred to throughout the Purchase Agreement as an “asset”, which was misleading as it had no value whatsoever. 5. C refunded to Shawbrook Bank a percentage of the purchase price or held it in a separate account, to cover any losses that might have arisen out of the Credit Agreement. In this way, C increased the purchase price to cover the payment made and this was hidden from Mr B and Mrs R. 6. Mr B and Mrs R were unaware of the existence of an agreement between C and Shawbrook Bank under which C would only arrange finance via Shawbrook Bank. Points 1-4 There are, in my view, some material shortcomings in the submissions S has made on Mr B and Mrs R’s behalf. S has based points 1-4 on the premise that Mr B and Mrs R’s Purchase Agreement involved them acquiring an interest in a specific property, under which they would have a fractional share in its value and from which they might expect to receive a sum from its ultimate future sale. That might have been the case in respect of their existing membership. But as Shawbrook Bank and our investigator have previously explained, the purchase on which Mr B and Mrs R’s complaint is founded was for points membership, rather than including any aspect of fractional ownership. So again, while I acknowledge the arguments S has made, they don’t seem to offer any basis on which they could lead to the creation of an unfair credit relationship between Mr B and Mrs R and Shawbrook Bank.

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Points 5 and 6 When C arranged the Credit Agreement with Shawbrook Bank, it did so at 0% interest over a twelve-month loan period. Under the commercial agreement1 in place at that time, that meant Shawbrook was entitled to a subsidy of 6.5% of the sum borrowed, which equated to £1,418.82. As noted above, in practice this meant that Shawbrook Bank only transferred 93.5% of the amount borrowed. S has argued that C refunded to Shawbrook Bank a percentage of the purchase price to cover any losses that might have arisen out of the Credit Agreement. Given that, S argues that C increased the purchase price to cover the payment made and this was hidden from Mr B and Mrs R. If that were the case, any increased price would potentially have been a cost of credit, whereas Mr B and Mrs R were told their loan was ‘interest free’. We have made previous enquiries of Shawbrook Bank of any explanation it could provide from C on whether the cost of any subsidy was applied to the purchase price of membership. In response, Shawbrook Bank has said: “We understand that the price of the timeshare membership being purchased was communicated to the customer by the sales representative before any decision was made about the means of payment (i.e. cash, credit card, loan). [C’s] sales representative had no discretion to alter the price of that purchase, and there was not a different price for customers if they subsequently went on to pay by cash or credit. The subsidy paid by [C] to Shawbrook for providing a loan to [Mr B and Mrs R] was not added to the price of the membership.” I understand this has been confirmed in an email from one of C’s directors, also explaining that subsidies were accounted for collectively and the price for a given membership was agreed before the payment method was decided. S hasn’t offered anything in support of its assertion that C increased the purchase price of membership to cover the subsidy payment made by C to Shawbrook Bank. And the available evidence doesn’t suggest to me that the price paid by Mr B and Mrs R for Fractional Club membership was so increased. I have gone on to consider whether Mr B and Mrs R ought to have been told by either C or Shawbrook Bank that a subsidy was paid for the arranging of the Credit Agreement. While at the Time of Sale there were rules in place requiring information disclosure on certain aspects of the credit arrangements2, I’m not minded to conclude that these extended as far as any subsidy needing to be disclosed where it did not alter the amount Mr B and Mrs R paid.3 I’ve thought about the Supreme Court’s conclusions in Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd [2025] UKSC 33 (“Hopcraft, Johnson and Wrench”), and whether they have a bearing on the 1 The commercial agreement between C and Shawbrook Bank is evidence I have accepted in confidence, as I am entitled to under DISP 3.5.9R. This rule (which can be found in the FCA Handbook) allows that I can accept information in confidence if I consider it appropriate. In this instance, this agreement is plainly commercially sensitive, and so I find it appropriate not to share this document but instead to provide a summary insofar as it relates to this complaint. 2 For example, the FCA’s Consumer Credit Sourcebook (CONC), The Consumer Credit (Agreements) Regulations 2010 and The Consumer Credit (Disclosure of Information) Regulations 2010. 3 If I thought that the price Mr B and Mrs R paid for membership had been increased to cover the cost of the subsidy, then that would arguably be a charge for credit and would also mean that, in practice, the 0% APR stated was wrong. But as I don’t think that happened, I don’t need to explore this further.

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payment of a subsidy. The Supreme Court looked at the payment of commission by lenders to car dealers in three instances. It found 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. 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: • 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 para.327); • the failure to disclosure the commission; and • 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 the fairness of a credit relationship under section 140A: • the size of the commission as a proportion of the charge for credit; • the way in which commission is calculated (a discretionary commission arrangement, for example, may lead higher interest rates); • the characteristics of the consumer; • the extent of any disclosure and the manner of that disclosure (which, insofar as s.56 CCA is engaged, includes any disclosure by a supplier when acting as a broker); and compliance with the regulatory rules. Although this judgment was concerned with the payment of commission made to brokers arranging credit, I have also thought about its application to Mr B and Mrs R’s case where a subsidy was paid. I can see the argument that if, without making it clear to a potential borrower, the amount borrowed was increased to cover the cost of a subsidy or if a borrower was only offered a higher interest rate to reduce the subsidy paid, those are factors that might lead to an unfair credit relationship. But as I’ve set out, neither of those things happened in Mr B and Mrs R’s case. S has suggested that there was some form of ‘commercial tie’ agreement between C and Shawbrook Bank that ought to have been disclosed to Mr B and Mrs R. I’m not persuaded that the arrangements between the parties were in the nature S has suggested. But even if I am wrong about that, or in finding that there was no regulatory duty for Mr B and Mrs R to have been told about the subsidy that was paid, I’m not inclined to think that either aspect led to an unfair credit relationship. Mr B and Mrs R got the best deal that was available to them – they were able to spread the cost of their membership over 12 months without paying anything extra for that and they would not have paid less had they done so using a different method of payment or a different lender. In conclusion, I do not think that the way that the Credit Agreement was arranged, nor the arrangements overall, have caused Mr B and Mrs R’s credit relationship with Shawbrook Bank to be unfair to them.

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Responses to my provisional decision Shawbrook Bank accepted my proposed outcome, although it expressed some concerns over my consideration of applying the principles in Hopcraft, Johnson and Wrench to the payment of the subsidy, and the indication that a subsidy payment could influence the APR a customer might receive, leading to an unfair credit relationship. S, responding on Mr B and Mrs R’s behalf, didn’t indicate whether or not they accepted the proposed outcome. Having received and reviewed what S has said, I’m conscious that it has focused solely on issues surrounding the provision of information, rather than the case merits. These include, among other things, requesting that the information we have received from Shawbrook Bank be shared with it in full, and asking that we do not proceed with a decision before this is done and it has had an opportunity to make further submissions. Those requests are not specific to Mr B and Mrs R’s case, and we have addressed them with S previously under separate correspondence. In light of this, and given that there is no other reason given as to why matters should be further delayed, I’ve concluded that it’s appropriate for me to proceed with my determination. 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. I appreciate the concern Shawbrook Bank has set out. However, I don’t agree that it is inappropriate to consider the potential for an unfair credit relationship to arise in circumstances where a subsidy is paid and as a consequence a customer is charged a higher APR. Although Hopcraft, Johnson and Wrench does not provide a direct read-across, the underlying principle of arrangements between a credit broker and lender having the potential for leading to an unfair credit relationship. That said, my finding was that this potential did not arise in Mr B and Mrs R’s case, because there was no increased borrowing or APR, which remained at 0%. So my conclusion in this respect remains the same. And as neither party has said anything else that gives me cause to change my provisional findings and intended conclusions, I adopt all of these in full in this final decision. My final decision Given all of the facts and circumstances of this complaint, I’m not persuaded it’s likely the credit relationship between Shawbrook Bank Limited and Mr B and Mrs R was unfair to them for the purposes of section 140A of the CCA. So my final decision is that I don’t uphold their complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B and Mrs R to accept or reject my decision before 21 April 2026. Niall Taylor Ombudsman

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