Mitsubishi HC Capital UK Plc · DRN-6258207

The complaint Mr S complaint is, in essence, that Mitsubishi HC Capital UK Plc trading as Hitachi Capital (the ‘Lender’) acted unfairly and unreasonably by (1) being party to an unfair credit relationship with him 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. What happened Mr and Mrs S purchased membership of a timeshare (the ‘Fractional Club’) from a timeshare provider (the ‘Supplier’) on 23 January 2013 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy 3,105 fractional points at a cost of £4,038 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Mr S 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. Mr S paid for their Fractional Club membership by taking finance of £4,038 from the Lender in his name (the ‘Credit Agreement’). Mr S – using a professional representative (the ‘PR’) – wrote to the Lender on 18 May 2018 (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 S’ concerns as a complaint and issued its final response letter on 8 August 2018, rejecting it on every ground. Mr S then referred the complaint 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 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’) dated 18 December 2025. In that decision, I said: 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 currently think that this complaint should be upheld because the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and/or selling Fractional Club membership to Mr S as an investment, which, in the circumstances of

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this complaint, rendered the credit relationship between him and the Lender unfair to him 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 this complaint, it is not 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 Mr S in the same or a better position than he would otherwise be in. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? Having considered the entirety of the credit relationship between Mr S 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 – which includes training material that I think is likely to be relevant to the 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 Mr S 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 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 Mr S says in two separate statements that the Supplier did exactly that at the Time of Sale – saying, in summary, that they were told by the Supplier that Fractional Club membership was the type of investment that would increase in value. The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this provisional decision, an 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. Mr and Mrs 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 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

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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 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 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 evidence in this complaint 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 S, 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 contemporaneous paperwork that state that Fractional Club membership was not sold to Mr and Mrs S as an investment. However, weighing up what happened in practice is, in my view, rarely as simple as looking at the contemporaneous paperwork. And for reasons I’ll now come on to, given the facts and circumstances of this complaint, I think the Supplier is likely to have breached Regulation 14(3) of the Timeshare Regulations. How the Supplier marketed and sold the Fractional Club membership During the course of the Financial Ombudsman Service’s work on complaints about the sale of timeshares, the Supplier has provided training material used to prepare its sales representatives – including a document called “2011 Spain PTM FPOC 1 Practice Slides Manual” (the ‘2011 Fractional Training Manual’). As I understand it, the 2011 Fractional Training Manual was used throughout the sale of the Supplier’s first version of a product called the Fractional Property Owners Club – which I’ve referred to and will continue to refer to as the Fractional Club. It isn’t entirely clear whether Mr S would have been shown the slides included in the Manual. But it seems to me to be reasonably indicative of: (1) the training the Supplier’s sales representatives would have got before selling Mr and Mrs S Fractional Club membership; and (2) how the sales representatives would have framed the sale of Fractional Club membership to Mr and Mrs S. Having looked through the manual, my attention is drawn to page 6 (of 41) – which includes the following slide on it:

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This slide titled “Why Fractional?” indicates that sales representatives would have taken Mr and Mrs S through three holidaying options along with their positives and negatives: (1) “Rent Your Holidays” (2) “Buy a Holiday Home” (3) The “Best of Both Worlds” It was the first slide in the 2011 Fractional Training Manual to set out any information about Fractional Club membership and I think it suggests that sales representatives were likely to have made the point to Mr and Mrs S that membership combined the best of (1) and (2) – which included choice, flexibility, convenience and, significantly, an investment they could use, enjoy and sell before getting money back. The manual then moved on to two slides (on pages 7 and 8) concerned with how Fractional Club membership worked: I’m aware that the Supplier says that 90-95% of its time during its sales presentations was focused on holidays rather than the sale of an allocated property. Having looked through the 2011 Fractional Training Manual, it seems to me that there were 10 slides on how Fractional Club membership worked before the slides moved onto to sections titled “Peace of Mind”, “Resort Management” and “Which Fractional”. And as 5 of the 10 slides look like they focused on holidays, there seems to me to have been a fairly even split during the Supplier’s sales presentations between marketing membership of the Fractional Club as a way of buying an interest in property and as a way of taking holidays.

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However, even if more time was spent on marketing membership of Fractional Club membership as a way of taking holidays rather than buying an interest in property, as the slides above suggest, in my view, that the Supplier’s sales representatives would have probably led prospective members to believe that a share in an allocated property was an investment (after all, that’s what the slide titled “Why Fractional” expressly described it as) , I can’t see why the Supplier wouldn’t have been in breach of Regulation 14(3) in those circumstances. I acknowledge that there may not have been a comparison between the expected level of financial return and the purchase price of Fractional Club membership. However, if I were to only concern myself with express efforts to quantify to Mr S the financial value of the proprietary interest they were offered, I think that would involve taking too narrow a view of the prohibition against marketing and selling timeshares as an investment in Regulation 14(3). 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)).”1 And in my view that must have been correct because it would defeat the consumer-protection purpose of Regulation 14(3) if the concepts of marketing and selling a timeshare as an investment were interpreted too restrictively. So, 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. 1 The Department for Business Innovation & Skills “Consultation on Implementation of EU Directive 2008/122/EC on Timeshare, Long-Term Holiday Products, Resale and Exchange Contracts (July 2010)”. https://assets.publishing.service.gov.uk/media/5a78d54ded915d0422065b2a/10-500-consultation-directive-timeshare- holiday.pdf

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Mr S says, in his own words, that the Supplier positioned membership of the Fractional Club as an investment to them. And as I’ve said before, the slides I’ve referred to above seem to me to reflect the training the Supplier’s sales representatives would have got before selling Fractional Club membership and, in turn, how they would have probably framed the sale of the Fractional Club to prospective members – including Mr and Mrs S. And as the slides clearly indicate that the Supplier’s sales representative was likely to have led them to believe that membership of the Fractional Club was an investment that may lead to a financial gain (i.e., a profit) in the future, I don’t find him either implausible or hard to believe when he says they were told: “We were encouraged to trade in our [FPOC] for one in [Tenerife] as they would be worth more as it is a hot climate all year round.” And: “We were told not to worry as we can sell at any time. But we will not get the full amount just what its value is at the time of sale but most likely still a good profit.” And: “They basically said that because the fractional product was about selling that we should purchase a fractional timeshare in a resort that was much better than ours because it would be more likely to sell and more likely to sell at a higher price so we would make more money on our investment.” On the contrary, in the absence of evidence to persuade me otherwise, I think that’s likely to be what Mr and Mrs S were led by the Supplier to believe at the relevant time. And for that reason, I think the Supplier breached Regulation 14(3) of the Timeshare Regulations. 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 Mr 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 that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mr S and the Lender that was unfair to him and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led him to enter into the Purchase Agreement and the Credit Agreement is an important consideration. On my reading of Mr S’ testimony, the prospect of a financial gain from Fractional Club membership was an important and motivating factor when they decided to go ahead with their purchase. That doesn’t mean they were not interested in holidays. His own testimony demonstrates that they quite clearly were. And that is not surprising given the nature of the product at the centre of this complaint. But as Mr S says (plausibly in my view) that Fractional Club membership was marketed and sold to them at the Time of Sale as something that offered them more than just holiday rights, on the balance of probabilities, I think their purchase 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 ‘standard’ type of timeshare available to them. And with that being the case, I think the Supplier’s breach of Regulation 14(3) was material to the decision they ultimately made.

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Mr S has 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 Fractional Club membership was an appealing investment opportunity. And as he faced the prospect of borrowing and repaying a substantial sum of money while subjecting himself to long-term financial commitments, had he not been encouraged by the prospect of a financial gain from membership of the Fractional Club, I’m not persuaded that he would have pressed ahead with his purchase regardless. Conclusion Given the facts and circumstances of this complaint, I think the Lender participated in and perpetuated an unfair credit relationship with Mr S 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. Fair Compensation Having found that Mr and Mrs S would not have agreed to purchase Fractional Club 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 the Consumer was unfair under section 140A of the CCA, I think it would be fair and reasonable to put him back in the position he would have been in had he not purchased the Fractional Club membership (i.e., not entered into the Purchase Agreement), and therefore not entered into the Credit Agreement, provided Mr and Mrs S agrees to assign to the Lender their Fractional Points or hold them on trust for the Lender if that can be achieved. Mr and Mrs S were existing Fractional Club members (‘FC Membership 1’) and their membership was traded in against the purchase price of Fractional Club membership in question (‘FC Membership 2’) at the Time of Sale. Under FC Membership 1, they had 2,988 of Fractional Points. And, like FC Membership 2, they had to pay annual management charges as part of FC Membership 1. So, had Mr and Mrs S not purchased FC Membership 2, they would have always been responsible to pay an annual management charge of some sort. With that being the case, any refund of the annual management charges paid by Mr and Mrs S from the Time of Sale as part of FC Membership 2 should amount only to the difference between those charges and the annual management charges they would have paid as part of FC Membership 1.

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On 28 October 2014 (the ‘Time of Upgrade’), Mr and Mrs S upgraded FC Membership 2 by trading in their existing Fractional Points for FC Membership 3, paying an additional £6,586 and entering into a new purchase agreement for a total of 3,480 Fractional Points. And the Credit Agreement was refinanced using a new loan taken out with a different lender at the time of the upgrade. Formally, the new purchase agreement superseded the old one, but in my view, it really just supplemented their FC Membership 2, rolling over their existing Fractional Points into FC Membership 3. And as I’ve already said, I don’t think the upgrade ended the unfairness under the Credit Agreement and related Purchase Agreement that stemmed from the acts and/or omissions of the Suppler at the Time of Sale given the facts and circumstances of this complaint. So, I think that there were ongoing effects of unfairness from Mr and Mrs S’ purchase of FC Membership 2 and the Credit Agreement that the Lender is answerable for. However, I recognise that the upgrade in question was paid for by funding from a new lender who is likely to bear some responsibility for any acts and/or omissions in the sales presentation. And for that reason, I’m not persuaded the Lender should have to answer for the financial consequences specifically associated with the 375 additional Fractional Points Mr and Mrs S purchased on 28 October 2014. So, in my view, the Lender needs to refund a proportion of the management charges payable after the Time of Upgrade that relates to the 3,105 of Fractional Points Mr and Mrs S held under FC Membership 2 – which, on this occasion, equates to 89% of the annual management charges paid after the Time of Upgrade under FC Membership 3. So, here’s what I think needs to be done to compensate Mr S with that being the case – whether or not a court would award such compensation: (1) The Lender should refund Mr S’ repayments to it under the Credit Agreement, including any sums paid to settle the debt, and cancel any outstanding balance if there is one. (2) In addition to (1), the Lender should also refund the difference between the FC Membership 2 annual management charges Mr S paid, between the Time of Sale and the Time of Upgrade, and what their FC Membership 1 annual management charges would have been at that time had they not purchased FC Membership 2. The Lender should also refund the difference between 89% of the FC Membership 3 annual management charges he paid after the Time of Upgrade and the annual management charges he would have paid under FC Membership 1 had they not purchased FC Membership 2. (3) The Lender can deduct: i. The value of any promotional giveaways that Mr and Mrs S used or took advantage of; i. Before the Time of Upgrade, the market value of the holidays* Mr and Mrs S took using FC Membership 2 if the Points value of the holiday(s) taken amounted to more than the total number of Fractional Points they would have been entitled to use at the time of the holiday(s) as ongoing FC Membership 1 members. However, this deduction should be proportionate and relate only to the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs S took a holiday worth 2,550 Fractional Points after the Time of Sale and they would have been entitled to use a total of 2,500

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Fractional Points under FC Membership 1 at the relevant time, any deduction for the market value of that holiday should relate only to the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 Fractional Points under FC Membership 1, for instance, there shouldn’t be a deduction for the market value of the relevant holiday. And i. After the Time of Trade-in, the market value of the holidays* Mr and Mrs S took using FC Membership 3 if the Points value of the holiday(s) taken amounted to more than the total number of Fractional Points they would have been entitled to use at the time of the holiday(s) as ongoing FC Membership 1 members. However, this deduction should relate only 89% of the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs S took a holiday worth 2,550 Fractional Points after the Time of Trade-In and they would have been entitled to use a total of 2,500 Fractional Points under FC Membership 1 at the relevant time, any deduction for the market value of that holiday should relate only to 89% of the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 Fractional Points under FC Membership 1, for instance, there shouldn’t be a deduction for the market value of the relevant holiday. (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 Mr S’ credit file in connection with the Credit Agreement reported within six years of this decision. (6) If Mr and Mrs S’ FC Membership 3 is still in place at the time of this decision, the Lender must ask the Supplier to reduce the number of Fractional Points they hold by 3,105 Fractional Points. If the Supplier agrees to do that, then Mr and Mrs S must agree to hold the remaining Fractional Points for the benefit of the Lender (or assign them to the Lender if that can be achieved. What’s more, the Lender must indemnify Mr S against 89% of all ongoing liabilities as a result of FC Membership 2. However, if in response to this provisional decision the Supplier doesn’t agree to reduce the number of Fractional Points Mr and Mrs S hold, the Lender must let me know so that I can consider the most appropriate remedy with that being the case. *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 Mr and Mrs S 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.

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My provisional decision For the reasons set out above, I intend to uphold this complaint. In conclusion, given the facts and circumstances of this complaint, I was persuaded that a breach of Regulation 14(3) was material to Mr S’ purchasing decision. The PR responded to the PD and accepted it. The Lender also responded – they did not accept the PD and provided some further comments and evidence they wish to be considered. In summary they stated: - The witness statement submitted in November 2023 (and originating from Mr S’ previous PR) is unsigned and undated. And it did not form part of the original bundle they received from that PR in 2018. It stated that this was evidenced by the presence of a new “date received” 2018 stamp which wasn’t on the original purchase agreement it previously received. - It felt this undermined Mr S’ testimony, and that the statement was most likely created closer to its 2023 submission. - It stated that no claim of being told they would “profit” from the membership was present in either the original letter of complaint or the termination teams’ rescission correspondence. - It felt the evidence available suggested that the purchase was made due to the promise of a guaranteed exit from membership in 15 years. - It felt that the reduction in fractions (from 4/52 to 3/52) was contradictory to the notion that Mr S was purchasing the membership due to a promise of profit. - It also didn’t see how Mr S could have purchased the membership as an investment only to seek to terminate the membership later. Having received the relevant responses from both parties, I’m now finalising my decision. 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 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. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2

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• 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. 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. 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 I understand that the Lender feels its provided evidence which suggests the “November 2023 submission” cannot be relied upon. And I accept its evidence concerning the presence of a received stamp on the purchase agreement. However, I think this discrepancy is ultimately irrelevant to the outcome of the complaint. This is because Mr S and his current PR have provided two different witness statements. One appears to have been produced with Mr S’ previous PR (and is the statement that the Lender appears to have issue with). The other is prepared by Mr S’ current PR – and whilst unsigned and undated the PR has provided system records to show the time the statement was gathered from the client. This was done in 2019 – and I have no reason to doubt its time of creation, particularly given that the PR has previously provided detailed explanations as to how and when it gathered these statements from its clients. As such, the reason that this particular concern is ultimately irrelevant to the outcome of the case is because even if I were to disregard the evidence that the Lender wishes me to, the other witness statement (which I’m satisfied was created in 2019) still reasonably persuades me that the prospect of a financial gain from Fractional Club membership was an important and motivating factor when Mr S decided to go ahead with his purchase. I say this in part because within this statement Mr S says:

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“They basically said that because the fractional product was about selling that we should purchase a fractional timeshare in a resort that was much better than ours because it would be more likely to sell and more likely to sell at a higher price so we would make more money on our investment.” The Lender believes the evidence suggests that Mr S made his purchase due to the promise of a guaranteed exit rather than any promise of profit. I agree that may well have been a factor in his decision making. But again, for the reasons already explained I’m satisfied that the promise of profit was also a material factor in his decision. I also appreciate the Lender’s point regarding the reduction in fractions (from 4/52 to 3/52), however when this is taken into account alongside Mr S’ recollections of the sale it does not seem contradictory to his decision being motivated by a promise of profit. The extract of witness statement quoted above clearly shows he thought he was purchasing into a resort which was “much better than ours”, “more likely to sell” and “more likely to sell at a higher price so we would make more money on our investment.” The Lender has also suggested that the lack of detailed accusations about the promise of profit in both the letter of complaint and rescission correspondence suggests that Mr S did not allege that the product was sold as a way of making a profit until later on in the complaint process. I’ve considered this, but as I’m sure the Lender is aware the letter of complaint and rescission letter typically is produced by the PR on behalf of the customer – it wouldn’t surprise me to find some detail from the consumer’s prepared statement missing from these letters. This is in part why witness statements can be so crucial in circumstances like this. And in any case, the issue with the product being an investment is still present in their letter of complaint – admittedly in less detail than the witness statement provides. However, I’m satisfied on balance that Mr S has consistently alleged that the product was sold to him as an investment with a promise of profit from at least January 2019 when his second statement was taken. This to me is a consistent accusation that he has maintained from then until today. Lastly the Lender has questioned why Mr S would seek to terminate his timeshare if he felt it was a valuable investment. I’ve considered this – but do not find it a particularly persuasive argument to make. Many complainants have attempted to terminate their contract in their initial efforts to ultimately seek compensation in circumstances such as Mr S’. I’m not convinced that this common practice undermines Mr S’ argument in this case. So, ultimately, for the above reasons, along with those I already explained in my PD, I remain persuaded that a breach of Regulation 14(3) was material to Mr S’ purchasing decision. As such I still think the credit relationship between Mr S and the Lender was unfair to him for this reason. Putting things right Having found that Mr and Mrs S would not have agreed to purchase Fractional Club 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 the Consumer was unfair under section 140A of the CCA, I think it would be fair and reasonable to put him back in the position he would have been in had he not purchased the Fractional Club membership (i.e., not entered into the Purchase Agreement), and therefore not entered into the Credit Agreement, provided Mr and Mrs S agree to assign to the Lender their Fractional Points or hold them on trust for the Lender if that can be achieved. Mr and Mrs S were existing Fractional Club members (‘FC Membership 1’) and their

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membership was traded in against the purchase price of Fractional Club membership in question (‘FC Membership 2’) at the Time of Sale. Under FC Membership 1, they had 2,988 of Fractional Points. And, like FC Membership 2, they had to pay annual management charges as part of FC Membership 1. So, had Mr and Mrs S not purchased FC Membership 2, they would have always been responsible to pay an annual management charge of some sort. With that being the case, any refund of the annual management charges paid by Mr and Mrs S from the Time of Sale as part of FC Membership 2 should amount only to the difference between those charges and the annual management charges they would have paid as part of FC Membership 1. On 28 October 2014 (the ‘Time of Upgrade’), Mr and Mrs S upgraded FC Membership 2 by trading in their existing Fractional Points for FC Membership 3, paying an additional £6,586 and entering into a new purchase agreement for a total of 3,480 Fractional Points. And the Credit Agreement was refinanced using a new loan taken out with a different lender at the time of the upgrade. Formally, the new purchase agreement superseded the old one, but in my view, it really just supplemented their FC Membership 2, rolling over their existing Fractional Points into FC Membership 3. And as I’ve already said, I don’t think the upgrade ended the unfairness under the Credit Agreement and related Purchase Agreement that stemmed from the acts and/or omissions of the Suppler at the Time of Sale given the facts and circumstances of this complaint. So, I think that there were ongoing effects of unfairness from Mr and Mrs S’ purchase of FC Membership 2 and the Credit Agreement that the Lender is answerable for. However, I recognise that the upgrade in question was paid for by funding from a new lender who is likely to bear some responsibility for any acts and/or omissions in the sales presentation. And for that reason, I’m not persuaded the Lender should have to answer for the financial consequences specifically associated with the 375 additional Fractional Points Mr and Mrs S purchased on 28 October 2014. So, in my view, the Lender needs to refund a proportion of the management charges payable after the Time of Upgrade that relates to the 3,105 of Fractional Points Mr and Mrs S held under FC Membership 2 – which, on this occasion, equates to 89% of the annual management charges paid after the Time of Upgrade under FC Membership 3. So, here’s what I think needs to be done to compensate Mr S with that being the case – whether or not a court would award such compensation: (7) The Lender should refund Mr S’ repayments to it under the Credit Agreement, including any sums paid to settle the debt, and cancel any outstanding balance if there is one. (8) In addition to (1), the Lender should also refund the difference between the FC Membership 2 annual management charges Mr S paid, between the Time of Sale and the Time of Upgrade, and what their FC Membership 1 annual management charges would have been at that time had they not purchased FC Membership 2. The Lender should also refund the difference between 89% of the FC Membership 3 annual management charges he paid after the Time of Upgrade and the annual management charges he would have paid under FC Membership 1 had they not purchased FC Membership 2. (9) The Lender can deduct: ii. The value of any promotional giveaways that Mr and Mrs S used or took advantage of;

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ii. Before the Time of Upgrade, the market value of the holidays* Mr and Mrs S took using FC Membership 2 if the Points value of the holiday(s) taken amounted to more than the total number of Fractional Points they would have been entitled to use at the time of the holiday(s) as ongoing FC Membership 1 members. However, this deduction should be proportionate and relate only to the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs S took a holiday worth 2,550 Fractional Points after the Time of Sale and they would have been entitled to use a total of 2,500 Fractional Points under FC Membership 1 at the relevant time, any deduction for the market value of that holiday should relate only to the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 Fractional Points under FC Membership 1, for instance, there shouldn’t be a deduction for the market value of the relevant holiday. And ii. After the Time of Trade-in, the market value of the holidays* Mr and Mrs S took using FC Membership 3 if the Points value of the holiday(s) taken amounted to more than the total number of Fractional Points they would have been entitled to use at the time of the holiday(s) as ongoing FC Membership 1 members. However, this deduction should relate only 89% of the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs S took a holiday worth 2,550 Fractional Points after the Time of Trade-In and they would have been entitled to use a total of 2,500 Fractional Points under FC Membership 1 at the relevant time, any deduction for the market value of that holiday should relate only to 89% of the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 Fractional Points under FC Membership 1, for instance, there shouldn’t be a deduction for the market value of the relevant holiday. (I’ll refer to the output of steps 1 to 3 as the ‘Net Repayments’ hereafter) (10) 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. (11) The Lender should remove any adverse information recorded on Mr S’ credit file in connection with the Credit Agreement reported within six years of this decision. (12) If Mr and Mrs S’ FC Membership 3 is still in place at the time of this decision, the Lender must ask the Supplier to reduce the number of Fractional Points they hold by 3,105 Fractional Points. If the Supplier agrees to do that, then Mr and Mrs S must agree to hold the remaining Fractional Points for the benefit of the Lender (or assign them to the Lender if that can be achieved. What’s more, the Lender must indemnify Mr S against 89% of all ongoing liabilities as a result of FC Membership 2. However, if in response to this provisional decision the Supplier doesn’t agree to reduce the number of Fractional Points Mr and Mrs S hold, the Lender must let me know so that I can consider the most appropriate remedy with that being the case. *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 Mr and Mrs S took using their Fractional Points, deducting

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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 For the reasons set out above, I uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 24 April 2026. Paul Clarke Ombudsman

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