Shawbrook Bank Limited · DRN-6060740

The complaint Mrs and Mr 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 them 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. As I will explain below, different considerations exist in relation to these two parts of the CCA and my decision will reflect these differences. What happened In April 2016, Mrs and Mr S purchased a ‘Fractional Club’ membership from a timeshare provider (the ‘Supplier’). The membership was asset backed – which meant it included a share of the net sale proceeds of a property named on the purchase agreement (the ‘Allocated Property’) after the membership term ended. Mrs and Mr S borrowed £19,059 from the Lender to buy the membership which appears to have included consolidation of a previous loan they’d taken out to buy a type of ‘trial’ timeshare membership several months earlier. In November 2024, Mrs and Mr S used a professional representative (‘PR’) to complain about the purchase and the related loan. The complaint letter said, in summary, that they were: 1. Pressured and rushed into signing important contractual documents. 2. Told that they had purchased an investment that would appreciate in value when that was not true. 3. Made to believe that they would have access to a wide range of holidays all around the year when that wasn’t true. 4. Given incorrect information about the ongoing maintenance fees. The Lender rejected the complaint on all grounds. Dissatisfied with the Lender’s response, Mrs and Mr S referred their complaint to the Financial Ombudsman Service via their PR. One of our investigators looked into the complaint and issued a ‘view’ saying they didn’t think it was unfair for the Lender to rely on the provisions of the Limitation Act 1980 (‘LA’) to decline a claim for misrepresentation under Section 75. This was essentially because this part of the complaint had been made late. Accordingly, the investigator didn’t recommend upholding the Section 75 part of the complaint. For the Section 140A element, (the allegations about an unfair credit relationship), the investigator thought our Service could consider a complaint under the standard jurisdiction rules we should apply. However, even with this being the case, they didn’t think we should uphold this part of the complaint either, based on the merits put forward. Finally, the investigator addressed the issue of commission. But because no commission was paid by the Lender to the Supplier in this case, the investigator didn’t think this made the credit relationship Mrs and Mr S had with the Lender unfair either.

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Because Mrs and Mr S’s PR didn’t agree with the outcome, the complaint was passed to me for an ombudsman’s decision. 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. Having done this, and for the same reasons already explained by our investigator, I am not upholding this complaint. I am sorry to disappoint Mrs and Mr S. The Section 75 Complaint When a complaint is referred to the Financial Ombudsman Service on the back of an unsuccessful attempt to advance a Section 75 claim, the act or omission that engages the Service’s jurisdiction is different to the considerations under Section 140A. It is the time of the creditor’s refusal to accept and pay the debtor’s claim which is relevant, rather than anything that occurs before the claim was put to the creditor. As a result, the standard jurisdiction rules which the Financial Ombudsman Service typically works to – the 6 and 3 year time limits (under DISP 2.8.2 (2) R) - don’t usually start until the respondent firm answers and refuses the Section 75 claim. What this means is that I can consider Mrs and Mr S’s complaint under Section 75. However, as our investigator has already explained, the Lender has a defence to the claim under the LA. It is this issue which I am considering here. The Act essentially sets out that the complainants had six years from which the cause of action accrued, to make the claim. 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 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 and Mr S’s Section 75 claim for misrepresentation was time-barred under the LA before they 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. 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. 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 in this case was 5 April 2016, when Mrs and Mr S entered into the purchase and the time of the alleged misrepresentations of the Supplier – which they say were relied upon. As the loan from the Lender was used to help finance the purchase, this was when they entered into the Credit Agreement that they suffered an alleged loss. Mrs and Mr S first notified the Lender of this Section 75 claim on 11 November 2024. As much 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 to reject it given what I’ve explained above. In this case, I haven’t seen any other arguments from Mrs and Mr S to persuade me otherwise. Their points of complaint contained within the PR’s letter set out alleged serious issues early on in the contract and would have clearly included being unhappy with the

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Supplier from the outset on a number of fronts. Having looked very carefully at what they have to say, I think the circumstances as they allege would have caused discovery of any misrepresentation matters within a very short time of the membership being taken out. I am therefore not upholding this aspect of their complaint as I don’t think the Lender acted unfairly in rejecting the claim, invoking the LA. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? There are other aspects of the sales process that, being the subject of dissatisfaction, I must explore with Section 140A of the CCA 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 and Mr 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. 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, 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 and Mr S and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mrs and Mr S’s complaint about the Lender being party to an unfair credit relationship was made for several reasons as set out by their PR. The PR says, for instance, that the right checks weren’t carried out before the Lender lent to Mrs and Mr S. I have now seen a great many similar complaints to this one and have noted this particular allegation set out by the same PR in exactly the same way, many times. Here, I don’t think it relates in any way to Mrs and Mr S’s situation. For example, I haven’t seen anything to persuade me this was the case in this complaint given its circumstances. 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 and Mr S was actually unaffordable before also concluding that they lost out as a result and then consider whether the credit relationship with the Lender was unfair for this reason. Mrs and Mr S have made a ‘client witness statement’ and I note they have not expanded at all on why or how the lending was unaffordable and from the information provided, I am not satisfied that the lending was unaffordable for them. 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. Again, I think this allegation is a generic one. It looks to me like Mrs and Mr S knew, amongst other things, how much they were borrowing

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and repaying each month, who they were borrowing from and that they were borrowing money to pay for the membership. As that lending doesn’t look like it was unaffordable, even if the Credit Agreement was arranged by a broker that didn’t have the necessary permission to do so, I can’t see why that led to them suffering a financial loss – such that I can say that the credit relationship in question was unfair as a result. I note that the PR specifically says – and then Mrs and Mr S themselves imply in their ‘client witness statement’ - that oppressive and rushed sales techniques were a feature of their membership purchase in 2016. But while I acknowledge that they may have felt weary after sales processes that went on for a long time, for example, I can’t see why this would have caused them to think they had no choice but to go ahead and buy a timeshare product which they didn’t want. I also see they have both signed a ‘right of withdrawal’ form which advised them of their right to cancel the transaction within a 14-day period, and they haven’t given any explanation as to why they didn’t do this. Overall, therefore, I don’t think that Mrs and Mr S’s 2016 credit relationship with the Lender was rendered unfair 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. And that’s the suggestion that membership was marketed and sold as an investment in breach of the 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 and Mr S’s 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 this type of 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.” The PR says that the Supplier did exactly this at the Time of Sale – saying, in summary, that Mrs and Mr S were told by the Supplier that this 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 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 because it offered Mrs and Mr S 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 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 this membership. They just regulated how such products were marketed and sold. To conclude, therefore, that membership was marketed or sold to Mrs and Mr S as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than

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not that the Supplier marketed and/or sold membership as an investment, i.e. told them or led them to believe that membership offered them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. I am familiar with the documentation and processes used by the Supplier during these types of sale. There is competing evidence in this complaint as to whether the 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 as an ‘investment’ or quantifying to prospective purchasers, such as Mrs and Mr S, 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. I also acknowledge that the Supplier’s sales process left open the possibility that the sales representative may have positioned membership as an investment. So, I accept that it’s equally possible that membership was marketed and sold to Mrs and Mr 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. 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 the Consumer rendered unfair? Having said 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 could have had on the fairness of the credit relationship between Mrs and 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 me that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mrs and Mr S and the Lender that was unfair and warranted relief as a result, then 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. In so far as any allegation of investment related marketing carried out by the Supplier during the sale is concerned, the PR said, “they were told they had purchased an investment which would appreciate in value.” However, there was no further descriptive detail or evidence underpinning these allegations within the Letter of Complaint. I do think it’s also relevant to point out here that Mrs and Mr H’s PR Letter of Complaint was brought in November 2024, with their own ‘client statement’ dated September 2024. I think this leads to some obvious concerns about the reliability of their memories of April 2016, given this considerable passage of time. Furthermore, I am mindful that a risk of inaccuracy related to the timing of the complaint and of their statement is apparent here: their complaint was made evidently after the influential

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court judgment on Shawbrook & BPF v FOS1. This case put several important legal and factual findings into the public domain that have had a significant influence on how future complaints about timeshares—especially fractional ownership models—are assessed. It brought significant public attention to issues specifically surrounding the alleged marketing and / or sale of timeshares as investments, which Regulation 14(3) prohibited. In my view, there’s a high risk that Mrs and Mr S’s 2024 suite of allegations were influenced by these subsequent events. Even so, looking carefully at the circumstances as a whole, I think it’s much more likely Mrs and Mr S were influenced by the prospect of the holidaying experiences on offer from the membership during this sale, rather than any investment related matters. We know that they already held a ‘trial’ membership in late 2015. And shortly after making the 2016 purchase, they went on to make another timeshare membership purchase in 2017 with similar features and with the same Supplier (although this time, having signed up, they say they withdrew during the 14-day cooling off period). Even if I were to take Mrs and Mr S’s client statement at face value, like our investigator I don’t think the prospect of the membership being an ‘investment’ is set out by Mrs and Mr S. Their statement, in my view, largely explains how the Fractional membership worked and that they were buying a small share in an Allocated Property – so in this sense their statement merely reflects the details and nature of the product they had bought. Of course, I have considered with care, that in their 2024 statement Mrs and Mr S do, albeit briefly, refer to being allegedly told about a potential to rent out their membership rights. But I need to consider these limited remarks in context and alongside their other comments about the sale and the circumstances around which it took place. I also think it’s right that I approach their 2024 comments with some caution, given what I’ve said above about the provenance of their allegations. All the circumstances I’ve seen point much more to Mrs and Mr S having a reasonably long relationship with the Supplier and a number of timeshare products. This includes information I can see they were given at the time of the 2016 sale which does say there are no resale, rental or repurchase of Fractional rights allowed under the rules. So, in my view, everything points to their 2016 purchase being based on a desire for personal holiday enjoyment and flexibility, rather than any long-term investment, which would only be realisable in their case, in 2032. Weighing all this up, and in the specific circumstances of this particular case, I do not think the prospect of a financial gain from their 2016 membership was an important and motivating factor when Mrs and Mr S decided to go ahead with the purchase. Overall, I think there’s more persuasive circumstantial evidence that their purchasing rationale lay elsewhere, supported as this is by their progression through the suite of timeshare products between 2015 - 2017, and the lack of any meaningful allegations that investment related marketing was something they factored into their purchasing calculations. None of what I’ve said means 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 I’m afraid Mrs and Mr S do not persuade me that their purchase was motivated by their share in the Allocated Property and the possibility of a profit. So, I don’t think a breach of Regulation 14(3) by the Supplier, even if there was one, was likely to have been material to the decision they ultimately made. 1 R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd and R (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin)

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Whether or not there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome in this complaint. That’s because everything I’ve comprehensively explained above leads me to think the evidence shows it’s much more likely that they would have still gone ahead and taken out the 2016 loan, whether or not the sale had been presented as an investment opportunity in breach of Regulation 14(3) of the Timeshare Regulations. In my view, they would have still pressed ahead. On this basis, I therefore don’t think the credit relationship was unfair. The provision of information by the Supplier at the Time of Sale Mrs and Mr S say they were not given sufficient information at the Time of Sale by the Supplier about some of the ongoing costs of the membership. The PR also says that the contractual terms governing the ongoing costs of membership and the consequences of not meeting those costs were unfair contract terms. In any event, 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 do acknowledge that it is also possible that the Supplier did not give Mrs and Mr S sufficient information, in good time, on the various charges they could have been subject to as 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. As for the PR’s argument that there were one or more unfair contract terms in the Purchase Agreement, I can’t see that any such terms were operated unfairly against Mrs and Mr S in practice, nor that any such terms led them to behave in a certain way to their detriment. So, with that being the case, I’m not persuaded that any of the terms governing membership are likely to have led to an unfairness that warrants a remedy. Commission 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);

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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. 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 Mrs and Mr S in arguing that the credit relationship with the Lender was unfair for reasons relating to commission given the facts and circumstances of this timeshare complaint. 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 Mrs and Mr S, nor have I seen anything that persuades me that the commission arrangement gave the Supplier a choice over the interest rate that led them 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, case law makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. What’s more, in stark contrast to the facts of Mr Johnson’s case, as I understand it, the Lender didn’t pay the Supplier any commission at the Time of Sale. And with that being the case, even if there were information failings at that time and regulatory failings as a result (which I make no formal finding on), I’m not 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. Overall, therefore, I’m not persuaded that any 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 in this case. Conclusion For the reasons I have comprehensively outlined above, I am not upholding Mrs and Mr S’s complaint. Once again, I’m sorry to disappoint them.

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My final decision I do not uphold Mrs and Mr S’s complaint. I do not require Shawbrook Bank Limited to do anything more. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs and Mr S to accept or reject my decision before 14 April 2026. Michael Campbell Ombudsman

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