Shawbrook Bank Limited · DRN-6233595

The complaint Miss R’s complaint is, in essence, that Shawbrook Bank Limited (the ‘Lender’) acted unfairly and unreasonably by (1) being party to an unfair credit relationship with her under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’) and (2) deciding against paying a claim under Section 75 of the CCA. The timeshare in question was bought jointly by Miss R and Mr A. But as the loan used to make the purchase was in Miss R’s sole name, she is the only eligible complainant here. I will, however, refer to both Miss R and Mr A where it is appropriate to do so. What happened Miss R and Mr A, in 2013, bought a trial timeshare membership from a timeshare provider (the ‘Supplier’). On 30 May 2014 (the ‘Time of Sale’) whilst on a complimentary holiday from the Supplier, Miss R and Mr A purchased a full membership of a timeshare (the ‘Balkan Jewel’) from the Supplier. They entered into an agreement with the Supplier to buy 8,000 fractional points (the ‘Purchase Agreement’), and after trading in their trial membership they ended up paying £8,062 for the Balkan Jewel membership. Balkan Jewel membership was asset backed – which meant the membership gave Miss R and Mr A more than just holiday rights. It also included a share in the net sale proceeds of a property named on their Purchase Agreement (the ‘Allocated Property’) after their membership term ends. Miss R paid for their Balkan Jewel membership by taking finance of £8,062 from the Lender (the ‘Credit Agreement’) in her sole name. Miss R and Mr A went on to make a further purchase of fractional points in 2015, but that sale (and the associated loan from a different finance company) is not the subject of this complaint and is included here for background purposes only. Miss R – using a professional representative (the ‘PR’) – wrote to the Lender on 11 September 2019 (the ‘Letter of Complaint’) to complain about: 1. Misrepresentations by the Supplier at the Time of Sale giving them a claim against the Lender under Section 75 of the CCA, which the Lender failed to accept and pay; and 2. The Lender being party to an unfair credit relationship under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A of the CCA. As both sides are familiar with those concerns, it isn’t necessary to repeat them in detail here beyond the summary above. The Lender dealt with Miss R’s concerns as a complaint and issued its final response letter on 1 November 2019, rejecting it on every ground.

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The PR, on Miss R’s behalf, then referred her complaint to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, initially didn’t think it should be upheld. Then, having reviewed the file, the Investigator said he thought it ought to be upheld. This was because he thought the Supplier had marketed and sold Balkan Jewel membership as an investment to Miss R and Mr A at the Time of Sale in breach of Regulation 14(3) of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 (the ‘Timeshare Regulations’). And given the impact of that breach on their purchasing decision, the Investigator concluded that the credit relationship between the Lender and Miss R was rendered unfair to her for the purposes of Section 140A of the CCA. The Lender disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. The provisional decision Having considered everything on file, I thought Miss R’s complaint ought to be upheld. I set out my initial thoughts in a provisional decision (the ‘PD’) and invited both sides to submit any new evidence or arguments that they wanted me to consider. In the PD I said: “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 currently think that this complaint should be upheld because the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and/or selling Balkan Jewel membership to Miss R and Mr A as an investment. And, in the circumstances of this complaint, this breach rendered Miss R’s credit relationship with the Lender unfair to her for the purposes of Section 140A of the CCA. However, before I explain why, I want to make it clear that my role as an Ombudsman is not to address every single point that has been made to date. Instead, it is to decide what is fair and reasonable in the circumstances of this complaint. So, while I recognise that there are a number of aspects to Miss R’s complaint, it isn’t necessary to make formal findings on all of them because, even if one or more of those aspects ought to succeed, the redress I am currently proposing puts Miss R in the same or better position than she would otherwise be in. Miss R and Mr A’s testimony As part of Miss R’s submissions to this service, on 5 November 2023 the PR provided a statement from Miss R and Mr A dated 7 June 2019. This set out their recollections of their entire relationship with the Supplier, and all of the purchases they made. As regards the Time of Sale being considered here, Miss R and Mr A say in the statement: “In 2014 we were on holiday in Crete using the [sic] fee week from [sic] out purchase in 2013. On arrival, there was a knock at our door from representatives who invited us to a welcome meeting. This was a sales presentation that lasted 4 hours.

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The representatives showed us a map of all the resorts within [the Supplier] Resorts and introduce us to the Fractional Property Owners Club. The representatives explained that this was an investment in property that would be required to be sold in 13 years. Once sold we would receive a cheque with our money back plus a profit which could supplement our retirement package, this is why we brought these fractions.” I have considered how much weight I can place on this statement when assessing the merits of Miss R’s complaint. The statement was dated three months prior to the Letter of Complaint being sent to the Lender. But there is no mention of the investment element in the Letter of Complaint, which I find odd. But I have also seen a letter of claim that the PR sent to the Supplier dated 29 July 2019 in which the PR does include the allegation that the Balkan Jewel membership was sold as an investment, and this letter follows closely and is generally consistent with the contents of the statement, which leads me to think that the statement was taken and used as part of the PR’s timeshare relinquishment work. So, I am satisfied that the statement was taken on the date it indicates. But the statement appears to have been prepared and written by the PR, and was probably taken during a telephone call with Miss R and Mr A. So, I am mindful of the risk that they may have been guided through the process by the PR, and the associated risk that what has been written may not be their own specific recollections. But I think that risk is low, as I can see the statement contains personal information about their entire purchasing history that only Miss R and Mr A would have known, so I have no doubt that they both had a significant input into its contents. It is also not unusual for statements to be prepared on complainants’ behalf by professional representatives. Taking everything into account I am satisfied that it is a record of Miss R and Mr A’s recollections of the Time of Sale. When considering how much weight I can place on their statement, I am assisted by the judgement in the case of Smith v Secretary of State for Transport [2020] EWHC 1954 (QB). At paragraph 40 of the judgment, Mrs Justice Thornton helpfully summarised the case law on how a court should approach the assessment of oral evidence. Although in this case I have not heard direct oral evidence, I think this does set out a useful way to look at the evidence Miss R has provided. Paragraph 40 reads as follows: a. “In assessing oral evidence based on recollection of events which occurred many years ago, the Court must be alive to the unreliability of human memory. Research has shown that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts (Gestin and Kogan). b. A proper awareness of the fallibility of memory does not relieve judges of the task of making findings of fact based upon all the evidence. Heuristics or mental short cuts are no substitute for this essential judicial function. In particular, where a party's sworn evidence is disbelieved, the court must say why that is; it cannot simply ignore the evidence (Kogan).

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c. The task of the Court is always to go on looking for a kernel of truth even if a witness is in some respects unreliable (Arroyo). d. Exaggeration or even fabrication of parts of a witness' testimony does not exclude the possibility that there is a hard core of acceptable evidence within the body of the testimony (Arroyo). e. The mere fact that there are inconsistencies or unreliability in parts of a witness' evidence is normal in the Court's experience, which must be taken into account when assessing the evidence as a whole and whether some parts can be accepted as reliable (Arroyo). f. Wading through a mass of evidence, much of it usually uncorroborated and often coming from witnesses who, for whatever reasons, may be neither reliable nor even truthful, the difficulty of discerning where the truth actually lies, what findings he can properly make, is often one of almost excruciating difficulty yet it is a task which judges are paid to perform to the best of their ability (Arroyo, citing Re A (a child) [2011] EWCA Civ 12 at para 20).” And having considered the statement, I feel able to place weight on its contents. I do so whilst being cognisant of the fact that memories can fade over time, and that inconsistencies in evidence are a normal part of someone trying to remember what happened in the past. So, I would not be surprised if there were some inconsistencies between what Miss R and Mr A say happened, and what other evidence shows. The question to consider, therefore, is whether there is a core of acceptable evidence from them, such that what inconsistencies there are have little to no bearing on whether the testimony can be relied on, or whether such inconsistencies are fundamental enough to undermine, if not contradict, what they say about what the Supplier said and did to market and sell the Balkan Jewel membership as an investment. And having compared what they have said happened with what I know about the type of membership they bought, and what the purchase documentation shows, I don’t see anything that fundamentally undermines the crux of the statement, which sets out how the Supplier sold and/or marketed the Balkan Jewel to them as an investment. So overall, I am currently satisfied that I can place weight on Miss R and Mr A’s testimony when considering what most likely happened at the Time of Sale. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? Having considered the entirety of the credit relationship between Miss R and the Lender along with all of the circumstances of the complaint, I think the credit relationship between them was likely to have been rendered unfair for the purposes of Section 140A. When coming to that conclusion, and in carrying out my analysis, I have looked at: 1. The Supplier’s sales and marketing practices at the Time of Sale; 2. The provision of information by the Supplier at the Time of Sale, including the contractual documentation and disclaimers made by the Supplier; 3. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; and 4. The inherent probabilities of the sale given its circumstances. I have then considered the impact of these on the fairness of the credit relationship between Miss R and the Lender.

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The Supplier’s breach of Regulation 14(3) of the Timeshare Regulations The PR has not set out that there was a breach of the Timeshare Regulations in the Letter of Complaint as part of Miss R’s complaint under Section 140A of the CCA. And as I’ve said I find that odd given that the investment element of the membership was given such prominence in Miss R and Mr A’s statement. But because I can see that a breach of Regulation 14(3) was raised by the PR in its letter to the Supplier (which predates the Letter of Complaint) I think this omission from the Letter of Complaint was most likely a mistake by the PR. I can see no reason why it would not have been mentioned as part of the complaint to the Lender, when it was set out to the Supplier. But in any event, as I’ve said, I am required to take into account the law and regulations when considering the merits of this complaint. And as Miss R and Mr A have said in their statement that the Balkan Jewel membership was sold to them as an investment, taken in conjunction with the letter the PR sent to the Supplier in which it was clearly set out that it was alleging there had been a breach of Regulation 14(3) by the Supplier at the Time of Sale, it is right that I consider her complaint under Section 140A of the CCA with the Timeshare Regulations in mind. The Lender does not dispute, and I am satisfied, that Miss R and Mr A’s Balkan Jewel 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 Balkan Jewel membership as an investment. This is what the provision said at the Time of Sale: “A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.” But Miss R and Mr A say that the Supplier did exactly that at the Time of Sale – saying: “The representatives explained that this was an investment in property that would be required to be sold in 13 years. Once sold we would receive a cheque with our money back plus a profit…” Miss R alleges therefore, albeit not explicitly, that the Supplier breached Regulation 14(3) at the Time of Sale because: (1) There were two aspects to their Balkan Jewel membership: holiday rights and a profit on the sale of the Allocated Property; and (2) They were told by the Supplier that they would get their money back or more during the sale of the Balkan Jewel membership. The term “investment” is not defined in the Timeshare Regulations. In Shawbrook & BPF v FOS1, the parties agreed that, 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” at [56]. I will use the same definition. Miss R and Mr A’s share in the Allocated Property clearly constituted an investment as it offered them the prospect of a financial return – whether or not, like all investments, that was 1 R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd and R (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin)

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more than what they first put into it. But the fact that Balkan Jewel 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 Balkan Jewel. They just regulated how such products were marketed and sold. To conclude, therefore, that Balkan Jewel membership was marketed or sold to Miss R and Mr A as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to them as an investment, i.e. told them or led them to believe that Balkan Jewel membership offered them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. And there is evidence in this case that the Supplier made efforts to avoid specifically describing membership of the Balkan Jewel as an ‘investment’ or quantifying to prospective purchasers, such as Miss R and Mr A, the financial value of their share in the net sales proceeds of the Allocated Property along with the investment considerations, risks and rewards attached to them. There were, for instance, disclaimers in the standard contemporaneous paperwork that state that Balkan Jewel membership was not sold to Miss R and Mr A as an investment. For example, on the second page of the Purchase Agreement, titled “Terms and Conditions”, the first read: “You should not purchase Your […] Fractional Points as an investment in real estate. The Purchase Price paid by You relates primarily to the provision of memorable holidays for the duration of Your ownership. You are at liberty to dispose of Your […] Fractional Points at any time prior to the Sale Date in accordance with Rule 7 of the Rules of the Owners Club.” Further, a document titled “Key Information”, an extract of which read: “Exact nature and content of the right(s): … Between six to nine months before the Proposed Sale Date, [the Trustee] will appoint two independent valuers to value the Property and will then take steps to sell the Property at the best achievable market price. You must bear in mind that your […] Fractional Points (and the purchase price paid by you for those points) relates primarily to the acquisition by you of many years of wonderful holidays. We are sure that you will get a great deal of pleasure from your holidays. Your decision to purchase […] Fractional Points should not be viewed by you as a financial investment.” Finally, there was another document titled “Customer Compliance Statement/Declaration to Treating Customers Fairly”, which included the following: “5. We understand that the purchase of our […] Fractional Points is an investment in our future holidays, and that it should not be regarded as a property or financial investment. We recognize that the sale price achieved on the sale of the Property in the Owners Club (and to which our […] Fractional Points have been attributed) will depend on market conditions at that time, that property prices can go down as well as up and that there is no guarantee as to the eventual sale price of the Property.

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6. We understand that the Property referenced on our Purchase Agreement will be sold as soon as possible on or after the Proposed Sale Date. However, we realise that it may not be possible to source a buyer immediately, and that in the event that the sale is affected on or after the Proposed Sale Date, we will be required to pay our Dues each year until the Property is sold.” These documents all appear to have been signed by Miss R and Mr A as having been read. However, weighing up what happened in practice is, in my view, rarely as simple as looking at the contemporaneous paperwork, and it is important to note that these documents would have been given to Miss R and Mr A to sign after they had been through the sales presentation, and after they had agreed to purchase the Balkan Jewel membership on the basis of the presentation and what they had been told by the Supplier. And there are a number of strands to Miss R’s allegation that the Supplier breached Regulation 14(3) at the Time of Sale, including (1) that membership of the Balkan Jewel was expressly described as an “investment” and (2) that membership of the Balkan Jewel could make them a financial gain. So, I have considered: (1) Whether it is more likely than not that the Supplier, at the Time of Sale, sold or marketed membership of the Balkan Jewel as an investment, i.e. told Miss R and Mr A or led them to believe during the marketing and/or sales process that membership of the Balkan Jewel was an investment and/or offered them the prospect of a financial gain (i.e., a profit); and, in turn (2) whether the Supplier’s actions constitute a breach of Regulation 14(3). And for reasons I’ll now come on to, given the facts and circumstances of this complaint, I think the answer to both of these questions is ‘yes’. How the Supplier marketed and sold the Balkan Jewel membership During the course of its dealing with complaints of a similar nature, this Service has seen some training material and some internal documents relating to the sale of fractional memberships by the Supplier. The Supplier has also provided witness statements from both previous and (at the time) existing employees setting out how its sales staff were trained to sell its products. I’ve considered all of this when thinking about the inherent probability of Miss R’s allegation, and I recognise the amount of witness evidence that’s been provided in support of the disclaimers in the paperwork I’ve referred to above. Indeed, I acknowledge what the witness statements say about the Supplier not referring to fractional membership as an ‘investment’, not making any reference to the value of the Allocated Property and making every effort not to give customers the impression that they were investing in something that would make them a profit. However, I think the argument by the Lender on this issue runs the risk of taking too narrow a view of the prohibition against marketing and selling timeshares as an investment. When the Government consulted on the implementation of the Timeshare Regulations, it discussed what marketing or selling a timeshare as an investment might look like – saying that ‘[a] trader must not market or sell a timeshare or [long-term] holiday product as an investment. For example, there should not be any inference that the cost of the contract would be recoupable at a profit in the future (see regulation 14(3)).” And in my view that must have been correct because it would defeat the consumer-protection purpose of Regulation 14(3) if

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the concepts of marketing and selling a timeshare as an investment were interpreted too restrictively. So, in my view, if a supplier implied to consumers that future financial returns (in the sense of possible profits) from a timeshare were a good reason to purchase it, I think its conduct was likely to have fallen foul of the prohibition against marketing or selling the product as an investment. Indeed, if I’m wrong about that, I find it difficult to explain why, in paragraphs 77 and 78 followed by 100 of Shawbrook & BPF v FOS, Mrs Justice Collins Rice said the following: “[…] I endorse the observation made by Mr Jaffey KC, Counsel for BPF, that, whatever the position in principle, it is apparently a major challenge in practice for timeshare companies to market fractional ownership timeshares consistently with Reg.14(3). […] Getting the governance principles and paperwork right may not be quite enough. The problem comes back to the difficulty in articulating the intrinsic benefit of fractional ownership over any other timeshare from an individual consumer perspective. […] If it is not a prospect of getting more back from the ultimate proceeds of sale than the fractional ownership cost in the first place, what exactly is the benefit? […] What the interim use or value to a consumer is of a prospective share in the proceeds of a postponed sale of a property owned by a timeshare company – one they have no right to stay in meanwhile – is persistently elusive.” “[...] although the point is more latent in the first decision than in the second, it is clear that both ombudsmen viewed fractional ownership timeshares – simply by virtue of the interest they confer in the sale proceeds of real property unattached to any right to stay in it, and the prospect they undoubtedly hold out of at least 'something back' – as products which are inherently dangerous for consumers. It is a concern that, however scrupulously a fractional ownership timeshare is marketed otherwise, its offer of a 'bonus' property right and a 'return' of (if not on) cash at the end of a moderate term of years may well taste and feel like an investment to consumers who are putting money, loyalty, hope and desire into their purchase anyway. Any timeshare contract is a promise, or at the very least a prospect, of long-term delight. [...] A timeshare-plus contract suggests a prospect of happiness-plus. And a timeshare plus 'property rights' and 'money back' suggests adding the gold of solidity and lasting value to the silver of transient holiday joy.” (emphasis my own) So, I’m not persuaded that the prohibition in Regulation 14(3) was confined to, for example, using the word ‘investment’ when promoting or selling a timeshare contract. I think that the prohibition may capture the promotion of investment features incorporated into a timeshare to persuade consumers to purchase, including leading a consumer to expect a financial gain from the timeshare. After all, Mrs Justice Collins Rice said in Shawbrook & BPF v FOS, at 76 (when discussing an ombudsman’s approach to Regulation 14(3)): “[…] He was entitled in other words to be highly sensitive to the overt and covert messaging – that is, the fine calibration of the encouragement given – by the seller in a case like this. There was nothing wrong with an approach which had the absolute prohibition in Reg.14(3) within the ombudsman's field of vision from the outset as he looked at the evidence for the true nature of the transaction that was done here. Indeed, he was required as a matter of law to do so.” (emphasis my own) But in their case, Miss R and Mr A state that the Supplier explicitly described the membership as an investment in property, and told them that they could expect to get their money back plus a profit on the sale of the Allocated Property.

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And as regards the disclaimers which I have set out above, it’s ultimately difficult to explain why it was necessary to include such disclaimers if there wasn’t a very real risk of the Supplier marketing and selling membership as an investment, given the difficulty of articulating the benefit of fractional ownership in a way that distinguishes it from other timeshares from the viewpoint of prospective members. There was, at the Time of Sale, likely to have been the opportunity for Miss R and Mr A to buy a non-fractional membership instead of the Balkan Jewel – alongside the fractional memberships the Supplier sold, there was a more traditional ‘points-based’ membership available - so I think it’s reasonable to assume there was likely some discussion at the Time of Sale as to why they should purchase this fractional type of membership in particular. In other words, some discussion about why Miss R and Mr A ought to purchase the Balkan Jewel in the way that they did. Given what Miss R and Mr A say in their testimony about how the Supplier sold Balkan Jewel to them, and that it was presented as an investment in property, I’ve thought about how the membership would likely have been presented to Miss R and Mr A. And I am satisfied I am able to do that. After all, In Onassis v. Vergottis [1968] 10 WLUK 101, Lord Pearce referred to the need to look at "probabilities", as well as contemporaneous documents and admitted or incontrovertible facts, when weighing the credibility of a witness's evidence (at p.431). In Armagas Ltd v. Mundogas SA (The Ocean Frost) [1986] 2 W.L.R. 1063, Goff LJ also referred to looking at “the overall probabilities” when ascertaining the truth (at p.57). And in Gestmin SGPS S.A. v. Credit Suisse (UK) Limited [2013] EWHC 3560, Leggatt J suggested (at para.22) that factual findings should be based on "inferences drawn from the documentary evidence and known or probable facts" (my emphasis). Here, I think it is inherently more probable that a timeshare product with an investment element is sold in a way promoting that element, and therefore risking a breach of Regulation14(3), compared with the sale of a product without the possibility of a monetary return.2 The investment element of membership was plainly a major part of its rationale and justification for its cost. And as it was designed to offer its members a way of making a financial return from the money they invested – whether or not, like every investment, the return was more, less or the same as the sum invested – again, it would not have made much sense if the Supplier included the feature in the product without relying on it to promote sales, especially when the reality was that the principal benefit of the Balkan Jewel, when compared to the non-fractional membership the Supplier offered, was its investment element i.e., the share in the net sale proceeds of the Allocated Property. And Miss R and Mr A have said that they were led to believe they would make a profit at the end of the agreement, and I think that belief fits with what they did at the Time of Sale. I again recognise what has been said in the statements provided by the Supplier. But these statements, provided from former employees of the Supplier, whilst giving a general overview of how salespersons were trained, don’t help me in understanding what happened at Miss R and Mr A’s particular sale. And in this regard Miss R and Mr A, in both the statement and in the PR’s letter to the Supplier (albeit this is not repeated in the Letter of Complaint), have been specific in what they say about how the Balkan Jewel was sold to them. They say it was positioned as an investment from which they would get their money back plus an additional profit from the sale of the Allocated Property. Given everything that has been submitted, I am persuaded it is more likely than not that the Supplier’s salesperson positioned Balkan Jewel membership to them as an investment that 2 This is different to saying that it is more likely than not that a product with an investment element is sold as an investment, simply due to that investment element. For the avoidance of doubt, I make no such finding.

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may lead to a financial gain (i.e., a profit) in the future. So, I am currently satisfied that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale. Was the credit relationship between the Lender and the Consumer rendered unfair? Having found that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I now need to consider what impact that breach had on the fairness of the credit relationship between Miss R and the Lender under the Credit Agreement and related Purchase Agreement. As the Supreme Court’s judgment in Plevin3 makes clear, it does not automatically follow that regulatory breaches create unfairness for the purposes of Section 140A. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. It also seems to me in light of Carney4 and Kerrigan5, that if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Miss R and the Lender that was unfair to her and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led her and Mr A to enter into the Purchase Agreement and her into the Credit Agreement is an important consideration. On my reading of Miss R and Mr A’s testimony, the prospect of a financial gain from the Balkan Jewel membership was an important and motivating factor when they decided to go ahead with their purchase. I am not saying they were not interested in holidays – they had, after all, already bought a trial membership. And I have seen that alongside the trial they also bought and additional 7-night preview week holiday, so this, alongside their reservation history demonstrates that they quite clearly were, which is unsurprising given the nature of the product at the centre of this complaint. But Miss R and Mr A says that Balkan Jewel membership was marketed and sold to them at the Time of Sale as something that offered them more than just holiday rights, and I am persuaded by this. And I am persuaded that it was the potential for a profit that was the reason they bought it. They have said (plausibly in my view): “The representatives explained that this was an investment in property that would be required to be sold in 13 years. Once sold we would receive a cheque with our money back plus a profit which could supplement our retirement package, this is why we brought these fractions.” So, I think the prospect of a financial gain at the end of their Balkan Jewel membership term was likely to have been a significant and motivating factor in Miss R and Mr A’s purchasing decision. And my thoughts on this are strengthened when I think about how Miss R and Mr A have described what happened when they made a further purchase of fractional points the following year. Although I am not considering a complaint about that purchase, I think it provides useful evidence about the reasons Miss R and Mr A had for making their purchases. As far as this second sale is concerned they say: “The whole point was to add to our investment portfolio of what we had bought the year before. It was sold like “if you buy more fractions today, your investment portfolio will be 3 Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 4 Carney v NM Rothschild & Sons Ltd [2018] EWHC 958 5 Kerrigan v Elevate Credit International Ltd [2020] EWHC 2169

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bigger and you will make more money”. They really focussed on selling it as an investment for money for a retirement plan.” This sets out, in my view, that Miss R and Mr A considered their fractional memberships (including the Balkan Jewel) as investments that would assist them in their retirement. Therefore, on the balance of probabilities, I think their purchase of the Balkan Jewel membership was motivated by their share in the Allocated Property and the possibility of a profit, as that share was one of the defining features of membership that marked it apart from the more traditional type of timeshare membership available. Miss R and Mr A have not said or suggested, for example, that they would have pressed ahead with the purchase in question had the Supplier not led them to believe that Balkan Jewel membership was an appealing investment opportunity. And as they faced the prospect of borrowing and repaying a substantial sum of money while subjecting themselves to long-term financial commitments, had they not been encouraged by the prospect of a financial gain from membership of the Balkan Jewel, I don’t think they would have pressed ahead with their purchase regardless. And with that being the case, I think the Supplier’s breach of Regulation 14(3) was material to the decision they ultimately made. Conclusion Given the facts and circumstances of their complaint, I think the Lender participated in and perpetuated an unfair credit relationship with Miss R under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A. And with that being the case, taking everything into account, I think it is fair and reasonable that I uphold this complaint.” I then set out what I considered to be a fair and reasonable way for the Lender to calculate and pay fair compensation to Miss R. The responses to the provisional decision The PR responded on Miss R’s behalf, accepting what I had said with nothing further to add. The Lender also responded, sending a comprehensive response setting out why it disagreed with my provisional findings and that the complaint ought to be rejected. It said it thought the circumstances of Miss R and Mr A’s purchase suggested they made the purchase for the holidays it would provide. It said, in summary: • There was no allegation that the product was sold as an investment in the Letter of Complaint, nor that Miss R and Mr A bought it for this reason. • There was no allegation made in the complaint form to the Financial Ombudsman Service, that the product was sold as an investment, neither was it mentioned in the section where Miss R set out the impact the purchase had had on her and Mr A. • If the product had been sold as an investment and had been purchased for the purpose of a financial gain, it is difficult to understand why this was not stated in the complaint to it or this Service. • Although the PD acknowledged that it was odd that the investment allegation was not raised in the Letter of Complaint given that the testimony was dated prior to this, the Ombudsman said it had been raised in the PR’s letter to the Supplier in July 2019. However, this was a common approach by the PR to include the same (or very similar) wording that the product was sold as an investment in the vast majority of their letters of complaint, regardless of whether there was evidence of this from their clients.

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• There are serious concerns with the witness testimony: o The word count is not correct. It suggests a word count of 990 words, but it is in fact 1071 words. This suggests it is possible that the testimony may have been amended at a later date. • The circumstances of Miss R’s purchase are more consistent with her purchasing the fractional points for additional holidays, rather than any investment: o The Balkan Jewel fractional points were cheaper than the alternative European Collection points, as are the Balkan Jewel management charges. o Miss R went on to purchase an additional 9,000 fractional points in September 2015 and 8,500 European Collection points in July 2016 (when fractional was no longer sold). o Miss R’s holiday usage indicates the purchase was for holidays. The holidays she has taken could not have been had she not increased her points holding. • In October 2018 and April 2019 Miss R contacted the Supplier in relation to possibly relinquishing or selling her points. She made no mention of regarding the product as an investment nor did she enquire how her profit would be realised. It concluded that it does not appear likely that the product was sold in breach of Regulation 14(3). And if I am to conclude otherwise, in any event it appears that that the prospect of a financial gain was not an important motivation for Miss R given she did not raise it in the Letter of Complaint nor the referral to this Service, and only did in 2023, and continued to purchase more points and use them for holidays. As both sides have now responded, the complaint has come back to me for further consideration. The legal and regulatory context In considering what is fair and reasonable in all the circumstances of the complaint, I am required under DISP 3.6.4R to take into account: relevant (i) law and regulations; (ii) regulators’ rules, guidance and standards; and (iii) codes of practice; and (where appropriate), what I consider to have been good industry practice at the relevant time. The legal and regulatory context that I think is relevant to this complaint is, in many ways, no different to that shared in several hundred ombudsman decisions on very similar complaints. As neither side has asked me to set it out in full, I do not consider it necessary to do so. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done so, and having considered everything that the Lender has said in response to my provisional decision, I am satisfied that this complaint ought to be upheld, for the same reasons as set out in the provisional decision. I will, however, address the points the Lender made in response, whilst bearing in mind 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. So 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.

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I again acknowledge that it is odd that there is no allegation that the Balkan Jewel was sold as an investment in either the Letter of Complaint or the referral to this Service. But, as I said in the PD, given that it did feature in the letter the PR sent to the Supplier in July 2019 I think its absences highlighted by the Lender are most likely a mistake by the PR. I do not think it fundamentally undermines the allegation made in Miss R’s statement. I also acknowledge that there seems to be a discrepancy between the word count set out in the statement, and how many words there actually are. Although this specific inconsistency was not one that I considered prior to making my provisional findings, having now done so it does not change my opinion. There is nothing to suggest that what has been written is not an accurate reflection of Miss R and Mr A’s recollections of their purchases. I have again considered whether there is a core of acceptable evidence in the statement, such that the inconsistencies have little to no bearing on whether the testimony can be relied on, or whether such inconsistencies are fundamental enough to undermine, if not contradict, what they say about what the Supplier said and did to market and sell the Balkan Jewel membership as an investment. And for the reasons set out in the PD, and having reconsidered it in light of the Lender’s points, I don’t see anything that fundamentally undermines the crux of the statement, which sets out how the Supplier sold and/or marketed the Balkan Jewel to them as an investment. So overall, I remain satisfied that I can place weight on Miss R and Mr A’s testimony when considering what most likely happened at the Time of Sale. And I remain persuaded that the Lender sold and/or marketed the Balkan Jewel membership to them as an investment in breach of Regulation 14(3) of the Timeshare Regulations. And as regards the Lender’s suggestion that the reason that Miss R and Mr A made the purchase was for the holidays that the membership offered, I addressed this point in the PD. I said, and maintain now, that they clearly were interested in holidays – they had, after all, already bought a trial membership, alongside which they also bought and additional 7-night preview week holiday. And their reservation history demonstrates quite clearly that using the membership for holidays was important, which is unsurprising. I do not think that because Miss R and Mr A used the points they had purchased is an indication that they did not buy the membership for its investment potential – it just shows they were using their points to their fullest extent. But Miss R and Mr A say that the Balkan Jewel membership was marketed and sold to them at the Time of Sale as something that offered them more than just holiday rights, and I remain persuaded by this. And I remain persuaded for the reasons set out in the PD, that it was the potential for a profit that was the reason they bought it. And with that being the case, I think the Supplier’s breach of Regulation 14(3) was material to the decision they ultimately made. Conclusion Given the facts and circumstances of this complaint, I think the Lender participated in and perpetuated an unfair credit relationship with Miss R under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A. And with that being the case, taking everything into account, I still think it is fair and reasonable that I uphold this complaint. Putting things right In my PD I set out what I considered to be a fair and reasonable way for the Lender to calculate and pay fair compensation to Miss R. Neither the Lender nor the PR have made any comments regarding my proposed redress methodology, so I see no reason to depart from what I set out in the PD.

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For the avoidance of doubt, I have set my directions out again here. Fair Compensation Having found that Miss R and Mr A would not have agreed to purchase Balkan Jewel membership at the Time of Sale were it not for the breach of Regulation 14(3) of the Timeshare Regulations by the Supplier (as deemed agent for the Lender), and the impact of that breach meaning that, in my view, the relationship between the Lender and Miss R was unfair under Section 140A of the CCA, I think it would be fair and reasonable to put her back in the position she would have been in had they not purchased the Balkan Jewel membership (i.e., not entered into the Purchase Agreement), and had she therefore not entered into the Credit Agreement, provided Miss R and Mr A both agree to assign to the Lender their fractional points or hold them on trust for the Lender if that can be achieved. Miss R and Mr A were trial members before purchasing Balkan Jewel membership. As I understand it, trial membership involved the purchase of a fixed number of week-long holidays that could be taken with the Supplier over a set period in return for a fixed price. The purpose of a trial membership was to give prospective members of the Supplier’s longer-term products a short-term experience of what it would be like to be a member of, for example, the Balkan Jewel. If, after purchasing a trial membership, a consumer went on to purchase membership of one of the Supplier’s longer-term products, their trial membership was usually cancelled and traded in against the purchase price of their timeshare – which was what happened at the Time of Sale. Miss R and Mr A’s trial membership was, therefore, a precursor to their Balkan Jewel membership. With that being the case, the trade-in value acted, in essence, as a deposit on this occasion and I think this ought to be reflected in my redress when remedying the unfairness I have found. So, given all of the above, here’s what I am directing the Lender to do to compensate Miss R – whether or not a court would award such compensation: (1) The Lender should refund Miss R’s repayments to it under the Credit Agreement, including any sums paid to settle the debt. (2) In addition to (1), the Lender should also refund: i. The annual management charges Miss R and Mr A paid as a result of Balkan Jewel membership. ii. The trade-in value given to Miss R and Mr A’s trial membership. (3) The Lender can deduct: i. The value of any promotional giveaways that Miss R and Mr A used or took advantage of; and ii. The market value of the holidays* Miss R and/or Mr A took using their fractional points. (I’ll refer to the output of steps 1 to 3 as the ‘Net Repayments’ hereafter) (4) Simple interest** at 8% per annum should be added to each of the Net Repayments from the date each one was made until the date the Lender settles this complaint. (5) The Lender should remove any adverse information recorded on Miss R’s credit file in connection with the Credit Agreement reported within six years of this decision. (6) If Miss R and Mr A’s Balkan Jewel membership is still in place at the time of this decision, as long as they both agree to hold the benefit of their interest in the Allocated

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Property for the Lender (or assign it to the Lender if that can be achieved), the Lender must indemnify them against all ongoing liabilities as a result of their Balkan Jewel membership. *I recognise that it can be difficult to reasonably and reliably determine the market value of holidays when they were taken a long time ago and might not have been available on the open market. So, if it isn’t practical or possible to determine the market value of the holidays Miss R and Mr A took using their fractional points, deducting the relevant annual management charges (that correspond to the year(s) in which one or more holidays were taken) payable under the Purchase Agreement seems to me to be a practical and proportionate alternative in order to reasonably reflect their usage. **HM Revenue & Customs may require the Lender to take off tax from this interest. If that’s the case, the Lender must give the consumer a certificate showing how much tax it’s taken off if they ask for one. My final decision I uphold this complaint and direct Shawbrook Bank Limited to calculate and pay fair compensation to Miss R as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss R to accept or reject my decision before 15 April 2026. Chris Riggs Ombudsman

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