DRN-6108187

The complaint Mr and Mrs D’s complaint is, in essence, that First Holiday Finance Ltd (the ‘Lender’) 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’). What happened Mr and Mrs D purchased membership of a timeshare (the ‘Fractional Club’) from a timeshare provider (the ‘Supplier’) on 30 July 2012 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy 1,476 fractional points at a cost of £20,199 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Mr and Mrs D 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 the end of their membership term. Mr and Mrs D paid for the majority of their Fractional Club membership by taking finance of £19,699 from the Lender (the ‘Credit Agreement’). They also paid a deposit of £500 separately. Mr and Mrs D – using a professional representative (the ‘PR’) – wrote to the Lender on 10 April 2025 (the ‘Letter of Complaint’) to raise a number of different concerns. As those concerns haven’t changed since they were first raised, and as both sides are familiar with them, it isn’t necessary to repeat them in detail here beyond the summary above. The Lender dealt with Mr and Mrs D’s concerns as a complaint and issued its final response letter on 22 April 2025, rejecting it on every ground. The complaint was then 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. Mr and Mrs D disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. The legal and regulatory context In considering what is fair and reasonable in all the circumstances of the complaint, I am required under DISP 3.6.4 R 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 published ombudsman decisions on very similar complaints – which can be found on the Financial Ombudsman Service’s website. And with that being the case, it is not necessary to set out that context in detail here. But I would add

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that the following regulatory rules/guidance are also relevant: The Office of Fair Trading’s Irresponsible Lending Guidance – 31 March 2010 The primary purpose of this guidance was to provide greater clarity for businesses and consumer representatives as to the business practices that the Office of Fair Trading (the ‘OFT’) thought might have constituted irresponsible lending for the purposes of Section 25(2B) of the CCA. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2 • Paragraph 2.3 • Paragraph 5.5 The OFT’s Guidance for Credit Brokers and Intermediaries - 24 November 2011 The primary purpose of this guidance was to provide clarity for credit brokers and credit intermediaries as to the standards expected of them by the OFT when they dealt with actual or prospective borrowers. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2 • Paragraph 3.7 • Paragraph 4.8 What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done that, I do not 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 140A of the CCA: did the Lender participate in an unfair credit relationship? Having considered the entirety of the credit relationship between Mr and Mrs D and the Lender along with all 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. The commission arrangements between the Lender and the Supplier at the Time of Sale and the disclosure of those arrangements; 4. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; 5. The inherent probabilities of the sale given its circumstances; and, when relevant 6. Any existing unfairness from a related credit agreement.

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I have then considered the impact of these on the fairness of the credit relationship between Mr and Mrs D and the Lender. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mr and Mrs D’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.” But the PR says that the Supplier did exactly that at the Time of Sale. The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this final 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 Mr and Mrs D the prospect of a financial return – whether or not, like all investments, that was more than what they first put into it. But it’s important to note at this stage that the fact that Fractional Club membership included an investment element did not, itself, transgress the prohibition in Regulation 14(3). That provision prohibits the marketing and selling of a timeshare contract as an investment. It doesn’t prohibit the mere existence of an investment element in a timeshare contract or prohibit the marketing and selling of such a timeshare contract per se. In other words, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. To conclude, therefore, that Fractional Club membership was marketed or sold to Mr and Mrs D 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 Fractional Club membership offered them 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’s 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 Mr and Mrs D, the financial value of their share in the net sales proceeds of their allocated property along with the investment considerations, risks and rewards attached to it. On the other hand, I acknowledge that the Supplier’s sales process left open the possibility

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that the sales representative may have positioned Fractional Club membership as an investment. So, I accept that it’s also possible that Fractional Club membership was marketed and sold to Mr and Mrs D 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 Mr and Mrs D rendered unfair? Having found that it was possible 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 Mr and Mrs D 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 Mr and Mrs D and the Lender that was unfair to them and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led them 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 Mr and Mrs D decided to go ahead with their purchase. Included in the PR’s initial submissions was a statement from Mr and Mrs D dated 10 April 2025 containing their recollections of the Time of Sale. Amongst other things, this says: “[…] 12. The salesperson started to explain how [Fractional Club membership] was an investment and that after 11 years, we would be able to sell our share. The salesperson then told us that [Fractional Club membership] is way better than normal holidays as with normal holidays you get nothing back but with [Fractional Club membership] you get all your money back. We were told it would be a good investment and this was the reason we decided to purchase the membership. 13. The salesperson also told us that with holidays, you only get photos and memories however, with [Fractional Club membership] we would get all of that and a return on all of our money. This would put us in a better place financially than with normal holidays. 14. We thought that this was a great deal. We would be able to get all our money back from the investment and be in a better financial position. It seemed like a win- win situation. […] 20. If we had been told that we would not be getting our money back, we would not have purchased the membership. That was the only good selling point. We were not interested in the holidays alone.

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[…]” I acknowledge that Mr and Mrs D say that they were told Fractional Club membership was a “good investment” and “this was the reason” they decided to purchase. And that they were told membership would offer holiday benefits as well as a “return” on their money. But it seems that the “return”, as Mr and Mrs D understood it, was nothing more than their initial outlay back. They say they considered membership to be “a great deal” as they “would be able to get all [their] money back”. They go on to say that “if [they] had been told that [they] would not be getting [their] money back, [they] would not have purchased the membership”. None of which suggests to me that Mr and Mrs D purchased Fractional Club membership in the expectation or hope of a financial gain or profit. Further, when Mrs D contacted the Supplier to surrender the membership due to a change in circumstances, there is no indication that she enquired about what would happen to her “investment”. Responding to the Investigator’s view, the PR has pointed to Mr and Mrs D’s comment that Fractional Club membership would leave them “in a better place financially than with normal holidays.” It argues that “capital preservation and being financially better off than an alternative are forms of financial gain.” I have thought carefully about what the PR has said, but I am not persuaded from the available evidence that Mr and Mrs D viewed potential savings on holidays as a form of profit at the Time of Sale, and it was this that motivated them to proceed with their purchase. That doesn’t mean they weren’t interested in a share in the Allocated Property. After all, that wouldn’t be surprising given the nature of the product at the centre of this complaint. But as Mr and Mrs D don’t persuade me that their purchase was motivated by their 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 they 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 Mr and Mrs D’s decision to purchase this 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 they would have pressed ahead with their purchase whether or not there had been a breach of Regulation 14(3). And for that reason, I do not think the credit relationship between Mr and Mrs D and the Lender was unfair to them even if the Supplier had breached Regulation 14(3). The provision of information by the Supplier at the Time of Sale The PR says that Mr and Mrs D were not given sufficient information at the Time of Sale by the Supplier about the ongoing costs of Fractional Club membership. 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 failures 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 Mr and Mrs D sufficient information, in good time, on the various charges they could have been subject to as Fractional Club members in order to satisfy the requirements of Regulation 12 of the 2010

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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 Mr and Mrs D nor the PR have persuaded me in this particular case that they would not have pressed ahead with their purchase had those details 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. Conclusion In summary, I am not persuaded that the Lender was party to a credit relationship with Mr and Mrs D under the Credit Agreement that was unfair to them 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 them. My final decision My final decision is to not uphold Mr and Mrs D’s complaint about First Holiday Finance Ltd for the reasons provided. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs D to accept or reject my decision before 19 May 2026. Alex Salton Ombudsman

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