Shawbrook Bank Limited · DRN-6249518

The complaint Mrs S’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 claims under Section 75 of the CCA. What happened Mrs S was the member of a timeshare provider (the ‘Supplier’) – having purchased other products from it over time. But the product at the centre of this complaint is her membership of a timeshare that I’ll call the ‘Fractional Club’ – which she bought on 27 November 2014 (the ‘Time of Sale’). She entered into an agreement with the Supplier to buy 1,620 fractional points at a cost of £12,364 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Mrs S more than just holiday rights. It also included a share in the net sale proceeds of a property named on the Purchase Agreement (the ‘Allocated Property’) after her membership term ends. Mrs S paid for her Fractional Club membership by taking finance of £12,364 from the Lender (the ‘Credit Agreement’). Mrs S – using a professional representative (the ‘PR’) – wrote to the Lender on 6 October 2023 (the ‘Letter of Complaint’) to raise a number of different concerns. Since then the PR has raised some further matters it says are relevant to this outcome of the complaint. As both sides are familiar with the concerns raised, it isn’t necessary to repeat them in detail here beyond the summary above. The Lender dealt with Mrs S’s concerns as a complaint and issued its final response letter on 22 April 2024, rejecting it on every ground. The complaint had, by that time, been referred to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, rejected the complaint on its merits. Mrs S disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. I considered the matter and issued a provisional decision (the ‘PD’). In that decision, I said: ‘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.

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The legal and regulatory context that I think is relevant to this complaint is no different to that shared in several hundred ombudsman decisions on very similar complaints. And with that being the case, it is not necessary to set it out here. 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. And having done that, I do not currently think this complaint should be upheld. 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, if I have not commented on, or referred to, something that either party has said, that does not mean I have not considered it. Section 75 of the CCA: the Supplier’s misrepresentations at the Time of Sale Section 75 creates a financial liability that the creditor is bound to pay. Liability under Section 75 isn’t based on anything the lender does wrong, but upon the misrepresentations and breaches of contract by the supplier, for which Section 75 imposes on the lender a “like claim” to that which the borrower enjoys against the supplier. If the lender is notified of a valid Section 75 claim, it should pay its liability. And if it fails or refuses to do so, that failure or refusal can give rise to a complaint to the Financial Ombudsman Service. As a general rule, creditors can reasonably reject Section 75 claims that they are first informed about after the claim has become time-barred under the Limitation Act 1980 (the ‘LA’) as it wouldn’t be fair to expect creditors to look into such claims so long after the liability arose and after a limitation defence would be available in court. So, it is relevant to consider whether Mrs S’s Section 75 claim for misrepresentation was time-barred under the LA before she put it to the Lender. A claim for misrepresentation against the Supplier would ordinarily be made under Section 2(1) of the Misrepresentation Act 1967. And the limitation period to make such a claim expires six years from the date on which the cause of action accrued (see Section 2 of the LA). But a claim, like the one in question here, under Section 75 is also ‘an action to recover any sum by virtue of any enactment’ under Section 9 of the LA. And the limitation period under that provision is also six years from the date on which the cause of action accrued. The date on which the cause of action accrued was the Time of Sale. I say this because Mr M entered into the purchase of his timeshare at that time based on the alleged misrepresentations of the Supplier – which she says were relied upon. And as the loan from the Lender was used to help finance the purchase, it was when she entered into the Credit Agreement that she suffered a loss. Mr M first notified the Lender of her Section 75 claim on 6 October 2023. And as more than six years had passed between the Time of Sale and when that claim was first put to the Lender, I don’t think it was unfair or unreasonable of the Lender not to accept Mrs S’s concerns about the Supplier’s alleged misrepresentations. Section 75 of the CCA: the Supplier’s Breach of Contract

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I have already summarised how Section 75 of the CCA works and why it gives consumers a right of recourse against a lender. So, it is not necessary to repeat that here other than to say that, if I find that the Supplier is liable for having breached the Purchase Agreement, the Lender is also liable. Mrs S says that she could not holiday where and when she wanted to. That was framed, in the Letter of Complaint, as an alleged misrepresentation. However, on my reading of the complaint, this suggests that the Supplier was not living up to its end of the bargain, potentially breaching the Purchase Agreement. Yet, like any holiday accommodation, availability was not unlimited – given the higher demand at peak times, like school holidays, for instance. Some of the sales paperwork likely to have been signed by Mrs S states that the availability of holidays was/is subject to demand. It also looks like she made use of her fractional points to holiday. I accept that she may not have been able to take certain holidays. But I have not seen enough to persuade me that the Supplier had breached the terms of the Purchase Agreement. So, from the evidence I have seen, I do not think the Lender is liable to pay Mrs S any compensation for a breach of contract by the Supplier. And with that being the case, I do not think the Lender acted unfairly or unreasonably in relation to this aspect of the complaint either. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that Fractional Club membership was actionably misrepresented by the Supplier at the Time of Sale. But there are other aspects of the sales process that, being the subject of dissatisfaction, I must explore with Section 140A in mind if I’m to consider this complaint in full – which is what I’ve done next. Having considered the entirety of the credit relationship between Mrs S and the Lender along with all of the circumstances of the complaint, I don’t think the credit relationship between them was likely to have been rendered unfair for the purposes of Section 140A. When coming to that conclusion, and in carrying out my analysis, I have looked at: 1. The standard of the Supplier’s commercial conduct – which includes its sales and marketing practices at the Time of Sale along with any relevant training material; 2. The provision of information by the Supplier at the Time of Sale, 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; 4. The inherent probabilities of the sale given its circumstances; and 5. Any existing unfairness from a related credit agreement. I have then considered the impact of these on the fairness of the credit relationship between Mrs S and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mrs S’s complaint about the Lender being party to an unfair credit relationship was and is made for several reasons. They include, allegations that: 1. Mrs S was pressured by the Supplier into purchasing Fractional Club membership at the Time of Sale.

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2. The right checks weren’t carried out before the Lender lent to Mrs S. 3. The Credit Agreement was arranged by a broker acting outside of its authorisation. However, as things currently stand, none of these strike me as reasons why this complaint should succeed. I acknowledge that Mrs S may have felt weary after a sales process that went on for a long time. But she says little about what was said and/or done by the Supplier during her sales presentation that made her feel as if she had no choice but to purchase Fractional Club membership when she simply did not want to. She was also given a 14-day cooling off period and she has not provided a credible explanation for why she did not cancel her membership during that time. And with all of that being the case, there is insufficient evidence to demonstrate that Mrs S made the decision to purchase Fractional Club membership because her ability to exercise that choice was significantly impaired by pressure from the Supplier. I haven’t seen anything to persuade me that the right checks weren’t carried out by the Lender given this complaint’s circumstances. But even if I were to find that the Lender failed to do everything it should have when it agreed to lend (and I make no such finding), I would have to be satisfied that the money lent to Mrs S was actually unaffordable before also concluding that she lost out as a result and then consider whether the credit relationship with the Lender was unfair to her for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mrs S. Connected to this is the suggestion by the PR that the Credit Agreement was arranged by an unauthorised credit broker, the upshot of which is to suggest that the Lender wasn’t permitted to enforce the Credit Agreement. However, it looks to me like Mrs S knew, amongst other things, how much she was borrowing and repaying each month, who she was borrowing from and that she was borrowing money to pay for Fractional Club membership. And as the lending doesn’t look like it was unaffordable for her, even if the Credit Agreement was arranged by a broker that didn’t have the necessary permission to do so (which I make no formal finding on), I can’t see why that led to Mrs S’s financial loss – such that I can say that the credit relationship in question was unfair on her as a result. And with that being the case, I’m not persuaded that it would be fair or reasonable to tell the Lender to compensate her, even if the loan wasn’t arranged properly. Overall, therefore, I don’t think that Mrs S’s credit relationship with the Lender was rendered unfair to her under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR now says the credit relationship with the Lender was unfair to her. And that’s the suggestion that Fractional Club membership was marketed and sold to her as an investment in breach of prohibition against selling timeshares in that way. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mrs S’s Fractional Club membership met the definition of a “timeshare contract” and was a “regulated contract” for the purposes of the Timeshare Regulations. Regulation 14(3) of the Timeshare Regulations prohibited the Supplier from marketing or selling Fractional Club membership as an investment. This is what the provision said at the Time of Sale: “A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.”

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But the PR says that the Supplier did exactly that at the Time of Sale – saying, in summary, that Mrs S told by the Supplier that Fractional Club membership was the type of investment that would only increase in value. The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this provisional decision, and by reference to the decided authorities, an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. A share in the Allocated Property clearly constituted an investment as it offered Mrs S the prospect of a financial return – whether or not, like all investments, that was more than what she first put into it. But it is important to note at this stage that the fact that Fractional Club membership included an investment element did not, itself, transgress the prohibition in Regulation 14(3). That provision prohibits the marketing and selling of a timeshare contract as an investment. It doesn’t prohibit the mere existence of an investment element in a timeshare contract or prohibit the marketing and selling of such a timeshare contract per se.1 In other words, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. To conclude, therefore, that Fractional Club membership was marketed or sold to Mrs S as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to her as an investment, i.e. told her or led her to believe that Fractional Club membership offered her the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. There is competing evidence in this complaint as to whether Fractional Club membership was marketed and/or sold by the Supplier at the Time of Sale as an investment in breach of regulation 14(3) of the Timeshare Regulations. On the one hand, it is clear that the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective purchasers, such as Mrs S, the financial value of her share in the net sales proceeds of the Allocated Property along with the investment considerations, risks and rewards attached to them. On the other hand, I acknowledge that the Supplier’s sales process left open the possibility that the sales representative may have positioned Fractional Club membership as an investment. So, I accept that it’s equally possible that Fractional Club membership was marketed and sold to Mrs S as an investment in breach of Regulation 14(3). However, whether or not there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome in this complaint for reasons I will come on to shortly. And with that being the case, it’s not necessary to make a formal finding on that particular issue for the purposes of this decision. Was the credit relationship between the Lender and Mrs S rendered unfair? Having found that it was possible that the Supplier breached Regulation 14(3) of the 1 The PR has argued that Fractional Club membership amounted to an Unregulated Collective Investment Scheme, however this was considered and rejected in the judgment in R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd and R (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin).

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Timeshare Regulations at the Time of Sale, I now need to consider what impact that breach had on the fairness of the credit relationship between Mrs S and the Lender under the Credit Agreement and related Purchase Agreement as the case law on Section 140A makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. Indeed, it seems to me that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mrs S 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 to enter into the Purchase Agreement and the Credit Agreement is an important consideration. But on my reading of the evidence before me, the prospect of a financial gain from Fractional Club membership was not an important and motivating factor when Mrs S decided to go ahead with her purchase. I say that because of what she says in her recollections from the Time of Sale. These can be found in her unsigned and undated ‘Statement of Truth’ and, to some extent, in copy handwritten call notes made by the PR and dated 13 June 2023. In the statement, Mrs S recalled the following: ‘We were told these suites would be exclusive to Signature Suite ‘owners’ only. By purchasing a week would ‘own’ that week and therefore this was an investment opportunity as the value would increase over the years. We were told that in 15 to 20 years the property could be sold and we would therefore make a profit. This ‘sale’ would depend on all owners - possibly 52 – all agreeing to the sale. We were then shown the ground floor apartment – a 1 bedroom suite. At this point we said we were not interested. The Rep tried hard to persuade us this was a good investment. We insisted we were not interested. A day or so later, the Rep that we had met on previous holidays knocked on our day [sic] and asked why we had not purchased a Signature Suite. We told her we were not particularly impressed with the ground floor one we were shown, neither were we taken with the previous Rep. This Rep asked us to join her in one of the top floor apartments, which was certainly impressive. My partner and I were so taken with this suite that it would make our retirement holidays luxurious and desirable. We were given the same assurances that the Signature suited would be exclusive to the owners, that it was a property investment that would see profits in future years. We were escorted to the Management Suite and were met by the Sales Manager and between him and the Rep were subjected to a hard sell – numbers on scraps of paper that I was not allowed to keep, bottles of bubbly and complete assurances that this was a great way to enter the Spanish property investment market. By trading in my Fractional Points I would only need to pay a small additional amount to have this exclusive use.’ The suggestion is that investing was a factor for Mrs S. However, I’m mindful of the fact that she decided against going ahead with the purchase initially – even taking account of the potential to make money. What seems to have swayed Mrs S was being shown another apartment on another day which she found to be ‘impressive’. She admits to being ‘taken’ by the suite and the desire to allow for holidays that were ‘luxurious and desirable’ and ‘exclusive’ in retirement. That being the case, I think it likely Mrs S would have gone ahead with the purchase in any event, even without the prospect of financial gain. That doesn’t mean Mrs S wasn’t interested in a share in the Allocated Property. After all, that

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wouldn’t be surprising given the nature of the product at the centre of this complaint. But as Mrs S herself doesn’t persuade me that her purchase was motivated by her share in the Allocated Property and the possibility of a profit, I don’t think a breach of Regulation 14(3) by the Supplier was likely to have been material to the decision she ultimately made. On balance, therefore, even if the Supplier had marketed or sold the Fractional Club membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, I am not persuaded that Mrs S’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 she would have pressed ahead with her purchase whether or not there had been a breach of Regulation 14(3). And for that reason, I do not think the credit relationship between Mrs S and the Lender was unfair to her even if the Supplier had breached Regulation 14(3). The provision of information by the Supplier at the Time of Sale The PR says that Mrs S was not given sufficient information at the Time of Sale by the Supplier about membership, including about the ongoing costs of Fractional Club membership and the fact that Mrs S’s heirs could inherit these costs. As I’ve already indicated, the case law on Section 140A makes it clear that it does not automatically follow that regulatory breaches create unfairness for the purposes of the unfair relationship provisions. The extent to which such mistakes render a credit relationship unfair must also be determined according to their impact on the complainant. I acknowledge that it is also possible that the Supplier did not give Mrs S sufficient information, in good time, on the various charges she could have been subject to as Fractional Club members in order to satisfy the requirements of Regulation 12 of the Timeshare Regulations (which was concerned with the provision of ‘key information’). But even if that was the case, I cannot see that the ongoing costs of membership were applied unfairly in practice. And as neither Mrs S nor the PR have persuaded me that she would not have pressed ahead with her purchase had the finer details of the Fractional Club’s ongoing costs been disclosed by the Supplier in compliance with Regulation 12, I cannot see why any failings in that regard are likely to be material to the outcome of this complaint given its facts and circumstances. As for the PR’s argument that Mrs S’s heirs would inherit the on-going management charges, I fail to see how that could be the case or that it could have led to an unfairness that warrants a remedy. Conclusion In conclusion, I do not think that the Lender acted unfairly or unreasonably when it dealt with the relevant Section 75 claims, and I am not persuaded that the Lender was party to a credit relationship with Mrs S under the Credit Agreement that was unfair to her for the purposes of Section 140A of the CCA – nor do I see any other reason why it would be fair or reasonable to direct the Lender to compensate her.’ The Lender confirmed its acceptance of the PD. The PR also responded – it did not accept the PD and provided some further comments and evidence it wished to be considered. Having received the relevant responses from both parties, I’m now finalising my decision.

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What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Following the responses from both parties, I’ve considered the case afresh and having done so, I’ve reached the same decision as that which I outlined in my provisional findings, for broadly the same reasons. Again, my role as an Ombudsman isn’t to address every single point which has been made to date, but to decide what is fair and reasonable in the circumstances of this complaint. If I haven’t commented on, or referred to, something that either party has said, this doesn’t mean I haven’t considered it. Rather, I’ve focused here on addressing what I consider to be the key issues in deciding this complaint and explaining the reasons for reaching my final decision. The PR’s further comments in response to the PD only relate to the issue of whether the credit relationship between Mrs S and the Lender was unfair. In particular, the PR has provided further comments in relation to whether the membership was sold to Mrs S as an investment at the Time of Sale. As outlined in my PD, the PR originally raised various other points of complaint, all of which I addressed at that time. But it didn’t make any further comments in relation to those in its response to my PD. Indeed, it hasn’t said it disagrees with any of my provisional conclusions in relation to those other points. On that basis, I see no reason to change my conclusions in relation to them as set out in my PD. So, I’ll focus here on the PR’s points raised in response. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The PR has provided its further thoughts as to Mrs S’s likely motivations for purchasing Fractional Club membership. I recognise it has interpreted Mrs S’s testimony differently to how I have and thinks it points to her having been motivated by the prospect of a financial gain from Fractional Club membership. But I’m not persuaded that the evidence supports the PR’s position on the matter. In my provisional decision I explained the reasons why I didn’t think Mrs S’s purchase was motivated by the prospect of a financial gain (i.e., a profit). The PR says that, when considered as a whole, the evidence demonstrates she was induced into the Purchase and Credit Agreements by the promise of an investment that would bring a profit. Although I have carefully considered the PR’s arguments in this regard, including the additional context it’s attempted to provide, I’m not persuaded the conclusion I reached on this point was unfair or unreasonable. I still think it reasonable to place emphasis on Mrs S’s written statement as being the truest reflection of her recollections of the Time of Sale. And the written statement suggests to me that Mrs S was strongly motivated by the potential for ‘luxurious and desirable’ holidays for her and her partner. I don’t dispute that investing was a factor for Mrs S in entering into the purchase. However, the evidence indicates to me that Mrs S would likely have gone ahead with the purchase in any event, due to the aims she stated she was looking to achieve at the Time of Sale.

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The PR says I failed to mention in my PD that Mrs S was on the verge of retirement at the Time of Sale and that I didn’t consider how that might have played into her thinking when considering the purchase. I disagree with this as I did consider Mrs S’s situation as part of the circumstances of the complaint. As I said in my PD: ‘The suggestion is that investing was a factor for Mrs S. However, I’m mindful of the fact that she decided against going ahead with the purchase initially – even taking account of the potential to make money. What seems to have swayed Mrs S was being shown another apartment on another day which she found to be ‘impressive’. She admits to being ‘taken’ by the suite and the desire to allow for holidays that were ‘luxurious and desirable’ and ‘exclusive’ in retirement. That being the case, I think it likely Mrs S would have gone ahead with the purchase in any event, even without the prospect of financial gain. [my emphasis]’ The PR says I also failed to consider the materiality of the sale that took place in 2013 and how that impacted on Mrs S at the Time of Sale. I’d emphasise that in this complaint I’ve focussed on the events of 2014 and note that the sale of 2013 which involved a third-party lender and was the subject of a separate complaint brought to this service. I see that, in that case, my ombudsman colleague held that the complaint about a credit relationship with the third-party lender that was unfair to her was not within this service’s jurisdiction and so couldn’t be considered. So, ultimately, for the above reasons, along with those I already explained in my PD, I remain unpersuaded that any breach of Regulation 14(3) was material to Mrs S’s purchasing decision. And for that reason, I do not think the credit relationship between Mrs S and the Lender was unfair to her even if the Supplier had breached Regulation 14(3). S140A conclusion Given all of the factors I’ve looked at in this part of my decision, including the relevant relationships, arrangements and payments between the Lender and the Supplier and having taken all of them into account, I’m not persuaded that the credit relationship between Mrs S and the Lender under the Credit Agreement and related Purchase Agreement was unfair to her. So, I don’t think it is fair or reasonable that I uphold this complaint on that basis. 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 dealt with Mrs S’s Section 75 claims. I am not persuaded that the Lender was party to a credit relationship with her under the Credit Agreement and related Purchase Agreement that was unfair to her 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 her. My final decision For these reasons, my final decision is that I don’t uphold the complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs S to accept or reject my decision before 22 April 2026. Nimish Patel Ombudsman

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