DRN-6295369

The complaint Mr and Mrs M’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 them 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. Background to the Complaint Mr and Mrs M was the member of a timeshare provider (the ‘Supplier’) – having purchased a number of products from it over time and owning a total of 10,000 points with it. But the product at the centre of this complaint is the membership of a timeshare that I’ll call the ‘Fractional Club’ – which they bought on 24 June 2013 (the ‘Time of Sale’). Mr and Mrs M entered into an agreement with the Supplier to buy 14,000 fractional points at a cost of £12,044 (the ‘Purchase Agreement’)1. They traded in their full holding of 10,000 points as part of the transaction. Fractional Club membership was asset backed – which meant it gave Mr and Mrs M 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 their membership term ends. Mr and Mrs M paid for their Fractional Club membership by taking finance of £12,044 from the Lender (the ‘Credit Agreement’). Mr and Mrs M – using a professional representative (the ‘PR’) – wrote to the Lender on 5 April 2019 (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 M’s concerns as a complaint and issued its final response letter on 9 May 2019, 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 M disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. I issued a provisional decision (the ‘PD’) to both parties on 1 April 2026. In my PD, I first set out 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) 1 The PR says in its Letter of Complaint that it is claiming £9,520 from the Lender. That is not the cost of the membership or the amount borrowed by Mr and Mrs M, so it is unclear to me why the PR is claiming that amount.

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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 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. The most relevant paragraphs to this complaint are Paragraph 2.2, 2.3 and 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. The most relevant paragraphs to this complaint, as they were at the relevant time, are Paragraphs 2.2, 3.7 and 4.8.” I then set out my provisional findings, as follows: “I have considered all the available evidence and arguments to decide what is 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 The CCA introduced a regime of connected lender liability under section 75 that affords consumers (“debtors”) a right of recourse against lenders that provide the finance for the acquisition of goods or services from third-party merchants (“suppliers”) in the event that there is an actionable misrepresentation and/or breach of contract by the supplier. Certain conditions must be met if the protection afforded to consumers is engaged, including, for instance, the cash price of the purchase and the nature of the arrangements between the parties involved in the transaction. The Lender doesn’t dispute that the relevant conditions are met. But for reasons I’ll come on to below, it isn’t necessary to make any formal findings on them here. It was said in the Letter of Complaint that Fractional Club membership had been misrepresented by the Supplier at the Time of Sale because Mr and Mrs M were told or led to believe by the Supplier that: (1) the only way they could exit their existing membership was to purchase a Fractional Points membership

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(2) they would be guaranteed to exit the fractional points membership after a finite number of years (3) the fractional membership contract would last for 15 years and, on 31 December 2029, the contract would end2; and (4) they would be buying into an “exclusive” membership, as provided by the Resort. As I understand it, the sale of the Allocated Property could be postponed in certain circumstances according to the Fractional Club Rules. But Mr and Mrs M say little to nothing to persuade me that they were given a guarantee by the Supplier that the Allocated Property would be sold on a specific date when such a promise would have been impossible to stand by given the inevitable uncertainty of selling property some way into the future. And as there isn’t enough evidence on file to support the PR’s allegation that Fractional Club membership had been misrepresented for reasons relating to point (4), I’m not persuaded that there were representations by the Supplier on the issues in question that constituted false statements of existing fact. So, while I recognise that Mr and Mrs M and the PR have concerns about the way in which Fractional Club membership was sold by the Supplier, when looking at the claim under Section 75 of the CCA, I can only consider whether there was a factual and material misrepresentation by the Supplier. For the reasons I’ve set out above, I’m not persuaded that there was. And that means that I don’t think that the Lender acted unreasonably or unfairly when it dealt with this particular Section 75 claim. Section 75 of the CCA: the Supplier’s Breach of Contract The PR says, on Mr and Mrs M’s behalf, that holiday accommodation would be secured thanks to Fractional Club membership when that was not true, and that they were promised the “best possible rate”, but it was not cheaper than holidays available through other means. And it suggests that they could not holiday where and when they wanted to, potentially breaching the Purchase Agreement. However, 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 Mr and Mrs M states that the availability of holidays was/is subject to demand. It also looks like Mr and Mrs M made use of their fractional points to holiday on a number of occasions. I accept that they may not have been able to take certain holidays and that they may have been able to obtain cheaper holidays through other means. But as existing members for many years, I think Mr and Mrs M would know the kind of holidays on offer through the membership (and the points required to take them). So, 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 Mr and Mrs M 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. 2 The Purchase Agreement states a proposed sale of the Allocated Property on 31 December 2027.

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The PR says, for instance, that: 1. Mr and Mrs M were pressured by the Supplier into purchasing Fractional Club membership at the Time of Sale; and 2. Fractional Club membership was marketed and sold as investment in breach of a prohibition on doing so. However, having considered the entirety of the credit relationship between Mr and Mrs M 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, when relevant 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 Mr and Mrs M and the Lender. The Supplier’s sales & marketing practices at the Time of Sale I acknowledge that the PR says that Mr and Mrs M may have felt weary after a sales process that went on for a long time. But they say little about what was said and/or done by the Supplier during the sales presentation that made them feel as if they had no choice but to purchase Fractional Club membership when they simply did not want to. Mr and Mrs M were also provided with a 14-day cooling off period, which they previously utilised when they cancelled an earlier purchase, and they have not provided me with a credible explanation for why they did not cancel the membership during that time if they felt pressured. And with all of that being the case, there is insufficient evidence to demonstrate that Mr and Mrs M made the decision to purchase Fractional Club membership because their ability to exercise that choice was significantly impaired by pressure from the Supplier. Overall, therefore, I don’t think that Mr and Mrs M’s credit relationship with the Lender was rendered unfair to them under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR says the credit relationship with the Lender was unfair to them. And that’s the suggestion that Fractional Club membership was marketed and sold to them 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

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The Lender does not dispute, and I am satisfied, that Mr and Mrs M’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 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 Mr and Mrs M the prospect of a financial return – whether or not, like all investments, that was more than what they 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. 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 M 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 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 Mr and Mrs M, the financial value of the 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 Mr and Mrs M 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

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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. Would the credit relationship between the Lender and Mr and Mrs M have been rendered unfair to them had there been a breach of Regulation 14(3) of the Timeshare Regulations? 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 M 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 M 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 M decided to go ahead with the purchase. I have first considered the testimony we received from the PR written by Mr M in his own handwriting, on 1 December 2023. Although the PR says the statement is not signed or dated, I can see that it has been signed by Mr M. Mr M says: “In June 2013 at [Resort], we had another meeting. By now we had had enough at the meeting we asked the question, how do we get out of this points system? The response was, you can give up your points and walk away, but you may have to pay management charges until [the Supplier] sells your points or, you can convert to a fractional property. When we asked about fractional all changed, we were shown to and seated at a table and over hour or more we must have had 3 or 4 different staff from [the Supplier] sit with us, giving information and advice on the benefits of fractions. What we made of it was, convert points to fractions will give you a fraction of a building in [?], you can still book as with points all over the world the difference with fractions you can sell them at any time and not like points only to [the Supplier] members. They offered £1.00 per point for 10,000 points we owned and we pay £12,044.00. The choice for us, walk away with nothing, maybe management charges to pay, or buy the fractions and maybe sell on. We decided to buy.” At no stage in Mr M’s detailed testimony does he say, or suggest, that he was told by the Supplier that he and Mrs M were investing their money or that they might receive more money than they put into the membership when their share in the Allocated Property was sold, i.e., a profit. Instead, he says that they decided to buy the Fractional Club membership as they wanted to shorten their membership term. That doesn’t mean Mr and Mrs M were not 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 M don’t persuade me that their purchase was motivated by the

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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 M’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 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 M 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 a payment of commission from the Lender to the Supplier at the Time of Sale should lead me to uphold this complaint. As both sides already know, the Supreme Court handed down an important judgment on 1 August 2025 in a series of cases concerned with the issue of commission: Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd [2025] UKSC 33 (‘Hopcraft, Johnson and Wrench’). The Supreme Court ruled that, in each of the three cases, the commission payments made to car dealers by lenders were legal, as claims for the tort of bribery, or the dishonest assistance of a breach of fiduciary duty, had to be predicated on the car dealer owing a fiduciary duty to the consumer, which the car dealers did not owe. A “disinterested duty”, as described in Wood v Commercial First Business Ltd & ors and Business Mortgage Finance 4 plc v Pengelly [2021] EWCA Civ 471, is not enough. However, the Supreme Court held that the credit relationship between the lender and Mr Johnson was unfair under Section 140A of the CCA because of the commission paid by the lender to the car dealer. The main reasons for coming to that conclusion included, amongst other things, the following factors: 1. The size of the commission (as a percentage of the total charge for credit). In Mr Johnson’s case it was 55%. This was “so high” and “a powerful indication that the relationship…was unfair” (see paragraph 327); 2. The failure to disclose the commission; and 3. The concealment of the commercial tie between the car dealer and the lender. The Supreme Court also confirmed that the following factors, in what was a non-exhaustive list, will normally be relevant when assessing whether a credit relationship was/is unfair under Section 140A of the CCA: 1. The size of the commission as a proportion of the charge for credit; 2. The way in which commission is calculated (a discretionary commission arrangement, for example, may lead to higher interest rates); 3. The characteristics of the consumer; 4. The extent of any disclosure and the manner of that disclosure (which, insofar as Section 56 of the CCA is engaged, includes any disclosure by a supplier when acting as a broker); and 5. Compliance with the regulatory rules.

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From my reading of the Supreme Court’s judgment in Hopcraft, Johnson and Wrench, it sets out principles which apply to credit brokers other than car dealer–credit brokers. So, when considering allegations of undisclosed payments of commission like the one in this complaint, Hopcraft, Johnson and Wrench is relevant law that I’m required to consider under Rule 3.6.4 of the Financial Conduct Authority’s Dispute Resolution Rules (‘DISP’). But I don’t think Hopcraft, Johnson and Wrench assists Mr and Mrs M in arguing that their credit relationship with the Lender was unfair to them for reasons relating to commission given the facts and circumstances of this complaint. As the Supreme Court said in paragraph 326 of its judgment in Hopcraft, Johnson and Wrench, it’s not possible to simply apply the reasoning of the Supreme Court in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 (‘Plevin’) to this complaint (as the PR does) when it’s concerned with a product and marketplace that were very different to those in Plevin. What’s more, Mr and Mrs M were provided with information as to the price of Fractional Club membership and the cost of the Credit Agreement (interest rate, fees, APR and monthly repayments). So, they were at least in a position from which they could understand the cost of the Credit Agreement and compare it with other options that might have been available at the Time of Sale. I haven’t seen anything to suggest that the Lender and Supplier were tied to one another contractually or commercially in a way that wasn’t properly disclosed to Mr and Mrs M, nor have I seen anything that persuades me that the commission arrangement between them gave the Supplier a choice over the interest rate that led Mr and Mrs M into a credit agreement that cost disproportionately more than it otherwise could have. I acknowledge that it’s possible that the Lender and the Supplier failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. But as I’ve said before, the case law on Section 140A makes it clear that regulatory breaches 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. And with that being the case, it isn’t necessary to make a formal finding on that because, even if the Lender and the Supplier failed to follow the relevant regulatory guidance at the Time of Sale, it is for the reasons set out below that I don’t currently think any such failure is itself a reason to find the credit relationship in question unfair to Mr and Mrs M. In stark contrast to the facts of Mr Johnson’s case, the amount of commission paid by the Lender to the Supplier for arranging the Credit Agreement that Mr and Mrs M entered into wasn’t high. At £963.52, it was only 8% of the amount borrowed and even less than that 8.7% as a proportion of the charge for credit. So, had they known at the Time of Sale that the Supplier was going to be paid a flat rate of commission at that level, I’m not currently persuaded that they either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mr and Mrs M wanted to purchase the Fractional Club membership and had no obvious means of their own to pay for it. And at such a low level, the impact of commission on the cost of the credit they needed for a timeshare they wanted doesn’t strike me as disproportionate. So, I think they would still have taken out the loan to fund their purchase at the Time of Sale had the amount of commission been disclosed. What’s more, based on what I’ve seen so far, the Supplier’s role as a credit broker wasn’t a separate service and distinct from its role as the seller of timeshares. It was simply a means to an end in the Supplier’s overall pursuit of a successful timeshare sale. I can’t see that the

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Supplier gave an undertaking – either expressly or impliedly – to put to one side its commercial interests in pursuit of that goal when arranging the Credit Agreement. And as it wasn’t acting as an agent of Mr and Mrs M but as the supplier of contractual rights they obtained under the Purchase Agreement, the transaction doesn’t strike me as one with features that suggest the Supplier had an obligation of ‘loyalty’ to them when arranging the Credit Agreement and thus a fiduciary duty. Overall, therefore, I’m not currently persuaded that the commission arrangements between the Supplier and the Lender were likely to have led to a sufficiently extreme inequality of knowledge that rendered the credit relationship unfair to Mr and Mrs M.” Lastly, I set out my thoughts on the alternative grounds relating to the commission arrangements: “The first ground relates to whether the Lender is liable for the dishonest assistance of a breach of fiduciary duty by the Supplier because it took a payment of commission from the Lender without telling Mr and Mrs M (i.e., secretly). And the second relates to the Lender’s compliance with the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. However, for the reasons I set out above, I’m not persuaded that the Supplier – when acting as credit broker – owed Mr and Mrs M a fiduciary duty. So, the remedies that might be available at law in relation to the payment of secret commission aren’t, in my view, available to them. And while it’s possible that the Lender failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between it and the Supplier, I don’t think any such failure on the Lender’s part is itself a reason to uphold this complaint because, for the reasons I also set out above, I think they would still have taken out the loan to fund their purchase at the Time of Sale had there been more adequate disclosure of the commission arrangements that applied at that time.” In short, given the facts and circumstances of this complaint, I did not think that the Lender acted unfairly or unreasonably when it dealt with Mr and Mrs M’s Section 75 claims. I was not persuaded that the Lender was party to a credit relationship with them under the Credit Agreement and related Purchase Agreement that was unfair to them for the purposes of Section 140A of the CCA. And having taken everything into account, I saw no other reason why it would be fair or reasonable to direct the Lender to compensate them. Responses to my provisional findings The Lender accepted my PD. The PR did not respond to the PD. The legal and regulatory context The legal and regulatory context that I think is relevant to this complaint has been shared in several hundred published decisions on very similar complaints, as well as in previous correspondence with the parties. So there’s no need for me to set this out again in detail here. I simply remind the parties that our rules3 say that in considering what is fair and reasonable in all the circumstances of the complaint, I will 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. 3 Financial Conduct Authority (“FCA”) Handbook – DISP 3.6.4R (“R” denotes a rule).

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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. As neither party has provided me with any further submissions, I see no reason to depart from the conclusion I reached in the PD. This means that, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mr and Mrs M’s Section 75 claims. I’m not persuaded that the Lender was party to a credit relationship with them under the Credit Agreement and related Purchase Agreement that was unfair to them 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 them. My final decision My decision is that I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs M to accept or reject my decision before 14 May 2026. Andrew Anderson Ombudsman

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