Shawbrook Bank Limited · DRN-6218266

The Complaint Mr and Mrs C’s complaint is, in essence, that a timeshare they purchased on 7 March 2016 (the ‘Time of Sale’) was mis-sold. And as Shawbrook Bank Limited financed that purchase, they say – with reference to and reliance on various provisions in the Consumer Credit Act 1974 (as amended) (the ‘CCA) – that it has acted unfairly and unreasonably in relation to that purchase. Background to the Complaint Mr and Mrs C purchased membership of a timeshare from a timeshare provider (the ‘Supplier’) at the Time of Sale – paying 18,456 Euros for it (the ‘Purchase Agreement’). The membership in question was asset backed – which meant it gave Mr and Mrs C more than just holiday rights (which was a week’s occupation in week 13 of a given year). It also included a share in the net sale proceeds of a property named on the Purchase Agreement (which was referred to as apartment 604) (the ‘First Allocated Property’) after their membership term was due to end. Mr and Mrs C paid for their membership by taking finance of £14,950 from Shawbrook over 60 months (the ‘Credit Agreement’). The APR was 13.1%, the total charge for that credit was £5,177.60 and the total amount repayable in the event the finance ran to term was £20,127.60. As I understand it, Mr and Mrs C subsequently exchanged their share in the First Allocated Property and holiday rights in week 13 for a share in a different apartment (505) (the ‘Second Allocated Property’) and holiday rights in week 12 of a given year – which they paid 1,170 Euros to do. Mr and Mrs C – using a professional representative (the ‘PR’) – wrote to Shawbrook on 25 November 2019 (the ‘Letter of Complaint’) to make claims under Section 75 of the CCA. The reasons for the claims at that time are likely to be familiar to both sides, so I don’t intend to repeat them here in detail. But, in summary, the PR said the following on Mr and Mrs C’s behalf: (1) The membership could be resold at any time and there was a guaranteed return on their initial investment plus a profit in 2030 at the latest when that wasn’t true. (2) Mr and Mrs C could also rent out their holiday rights for at least 2000 Euros – enabling them to pay the annual management charge and make a profit – when that wasn’t true. (3) The Supplier led Mr and Mrs C to believe that they couldn’t give up their existing timeshare without the Supplier’s help when that wasn’t true. It was for these reasons that the PR said Mr and Mrs C made their purchase. However, the PR went on to suggest that Mr and Mrs C did express some concerns at the Time of Sale about the fact that the First Allocated Property was on the 6th floor and only accessible by stairs. But Mr and Mrs C were assured by the Supplier that lifts would be installed in the future – which never materialised.

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The PR also alleged that, because certain aspects of the Supplier’s business had been closed down, the promises it made to Mr and Mrs C in relation to renting holiday rights and making a profit on the sale of the First and then Second Allocated Property will remain unfulfilled. On 10 January 2020, the Supplier wrote to Shawbrook setting out its position on the Letter of Complaint – which the Supplier rejected in its entirety. And on the 13th of that month, Shawbrook wrote to the PR rejecting Mr and Mrs C’s concerns in full (the ‘FRL’). The PR responded to the FRL two days later on 15 January 2020. The PR accepted that the loan in question had been granted “correctly” by Shawbrook before setting out, in very general terms (with reference to all of its clients at times), the concerns it had about timeshares sold by the Supplier. Shortly after that, on 31 January 2020, the complaint was referred to the Financial Ombudsman Service. The contents of the accompanying Complaint Form repeated some of what the Letter of Complaint had to say. But the PR did question whether Mr and Mrs C should have been lent to at the Time of Sale given their age at that time. The complaint was then looked at by an Investigator who concluded that Shawbrook didn’t need to do anything to compensate Mr and Mrs C because neither of their Section 75 claims for misrepresentation nor breach of contract had any merit – nor did the Investigator think they were lent to improperly. The PR disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision. When doing that, the PR submitted a copy of an updated complaint it had sent to Shawbrook on 20 February 2024 now arguing, for many of the same reasons set out in the Letter of Complaint (albeit in more detail) that it’s credit relationship with Mr and Mrs C was unfair to them because the Supplier had breached a prohibition on selling timeshares as an investment. While the complaint awaited review by an Ombudsman, it was looked at by a Senior Investigator who, in addition to agreeing to the first Investigator’s view on Mr and Mrs C’s allegations of misrepresentation and breach of contract, wasn’t persuaded that their membership had been sold in breach of a prohibition on selling timeshares as investments. And in her view, therefore, Mr and Mrs C’s credit relationship with Shawbrook wasn’t unfair to them for that reason or any other reason for that matter. The PR continued to disagree with the outcome reached at the informal stage of the Financial Ombudsman Service’s process – its reasons for which repeated much of what it first complained about. And as the Senior Investigator still wasn’t persuaded that there had been a breach of a prohibition on selling timeshares as investments or that such a breach (were there one) rendered the credit relationship between Mr and Mrs C and Shawbrook unfair to them, an informal resolution to this complaint wasn’t possible. I issued a provisional decision (‘PD’) on 2 March 2026 rejecting Mr and Mrs C’s complaint. In summary, I wasn’t persuaded that Shawbrook acted unfairly or unreasonably when it dealt with Mr and Mrs C’s Section 75 claims – nor was I persuaded that Shawbrook 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 for why it would be fair or reasonable to direct Shawbrook to compensate them. Shawbrook had nothing to add in response to my PD. The PR, on Mr and Mrs C’s behalf, disagreed with it. And, in summary, it says that:

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(1) Membership was misrepresented by the Supplier at the Time of Sale for reasons relating to the lack of lift access in the building in which the Allocated Properties were located. (2) There is evidence on file of a breach by the Supplier of the prohibition on selling timeshares as investments. (3) The Supplier has already breached the contract with Mr and Mrs C. (4) Mr and Mrs C weren’t told about the cooling off period they were entitled to under the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 (the ‘Timeshare Regulations’). (5) Shawbrook didn’t carry out any sort of creditworthiness assessment before lending to Mr and Mrs C. So, the complaint was passed back to me to finalise my thoughts. The Legal and Regulatory Context As I said in my PD, in considering what is fair and reasonable in all the circumstances of the complaint, I’m required under Rule 3.6.4 of the Dispute Resolution Rules (which can be found in the Financial Conduct Authority’s Handbook of Rules and Guidance) to take into account: relevant (i) law and regulations; (ii) regulators’ rules, guidance and standards; and (iii) codes of practice; and (when appropriate), what I consider to have been good industry practice at the relevant time. The legal and regulatory context that I still think is relevant to this complaint is, as I also said in my PD, no different to that shared in several hundred ombudsman decisions on very similar complaints. And as both Shawbrook and the PR are likely to be familiar with that context, it isn’t necessary to set it out here. My Findings 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 still don’t think this complaint should be upheld. However, before I explain why, I want to repeat the point I made in my PD 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 alleged Misrepresentations at the Time of Sale As I said in my PD, certain conditions must be met if the protection afforded to consumers under Section 75 of the CCA is engaged, including, for instance, those in relation to the cash price of the purchase and the nature of the arrangements between the parties involved in the transaction. But as I also said in my PD, it isn’t necessary to make any formal findings on those conditions here as I don’t think there’s any merit to the allegations in question anyway. It was suggested in the Letter of Complaint that Mr and Mrs C’s membership had been misrepresented by the Supplier at the Time of Sale because they were led to believe or told by the Supplier that:

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(1) The membership could be resold at any time and there was a guaranteed return on their initial investment plus a profit in 2030 at the latest when that wasn’t true. (2) They could also rent out their holiday rights for at least 2000 Euros – enabling them to pay the annual management charge and make a profit – when that wasn’t true. (3) They couldn’t give up their existing timeshare without the Supplier’s help when that wasn’t true. The PR also argues that membership was misrepresented by the Supplier at the Time of Sale because the Supplier never installed lift access in the building in which the Allocated Properties were located despite the assurances it gave Mr and Mrs C that it would do so. However, as I said in my PD, when looking at a claim under Section 75 of the CCA, I can only consider whether there was a factual and material misrepresentation by the Supplier. Mr and Mrs C still haven’t set out who said what and in what circumstances to give this aspect of the complaint the colour and context necessary to demonstrate that the Supplier made false statements of existing fact and/or opinion. And as there isn’t any other evidence on file to support the suggestion that the timeshare was misrepresented for the reasons above, I don’t think it was. For that reason, therefore, I don’t think that Shawbrook acted unreasonably or unfairly when it dealt with this particular Section 75 claim. Section 75 of the CCA: the Supplier’s alleged Breach of Contract It had been suggested by the PR that, because certain aspects of the Supplier’s business were closed down or sold on, the promises it made to Mr and Mrs C in relation to renting holiday rights and making a profit on the sale of the First Allocated Property will remain unfulfilled. However, as I said in my PD, when the PR referred this complaint to the Financial Ombudsman Service, it submitted a letter from the Supplier to Mr and Mrs C (dated 22 October 2019) confirming that they had cancelled their membership. And with that being the case, it still isn’t clear to me how the Supplier can be said to be in anticipatory breach of the contract between it and Mr and Mrs C when it comes to the sale of the Allocated Property if the contract in question was and is no longer in place after Mr and Mrs C’s cancellation. What’s more, the Supplier told Shawbrook on 10 January 2020 (in its response to Mr and Mrs C’s complaint) that, while the relevant part of its business had ceased trading rather than close its doors, it continued to administer memberships like Mr and Mrs C’s. And as neither they nor the PR have provided me with any evidence to demonstrate that, before they cancelled their membership in late 2019, they were no longer getting what they had bargained for at the Time of Sale, I still don’t think Shawbrook is liable to pay Mr and Mrs C any compensation for a breach of contract by the Supplier. And with that being the case, it remains my view that Shawbrook didn’t act unfairly or unreasonably in relation to this aspect of the complaint either. Section 140A of the CCA: did Shawbrook participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that Mr and Mrs C’s membership was actionably misrepresented by the Supplier at the Time of Sale. But, as I said in my PD, the very aspects of the sales process that fuelled that allegation must also be explored with Section 140A in mind.

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Having reconsidered the entirety of the credit relationship between Mr and Mrs C and Shawbrook along with all of the circumstances of the complaint, I still don’t think the credit relationship between them was likely to have been rendered unfair to Mr and Mrs C for the purposes of Section 140A. When coming to that conclusion, and in carrying out my analysis, I have looked again at: 1. The standard of the Supplier’s commercial conduct – which includes its sales and marketing practices at the Time of 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. The commission arrangements between Shawbrook 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; and 5. 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 and Mrs C and Shawbrook. While the PR, in its response to Shawbrook’s FRL, seemed to drop its concerns about Shawbrook’s decision to lend to Mr and Mrs C (having accepted that the loan in question had been granted “correctly”), it now appears to have rowed back on that in response to my PD. However, even if I were to find that Shawbrook 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 (1) the money lent to Mr and Mrs C was actually unaffordable, (2) they lost out as a result and (3) the credit relationship with Shawbrook was unfair to them for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mr and Mrs C. The PR still seems to be concerned by what it says were information failings by the Supplier because Mr and Mrs C weren’t told that defaulting on their loan would have led to the confiscation of their membership. But I still haven’t seen enough evidence to indicate that’s what would have happened in practice. In response to my PD the PR also says that Mr and Mrs C weren’t told about the cooling off period they were entitled to under the Timeshare Regulations. But I find that assertion difficult to square with Part 2 of Mr and Mrs C’s Standard Information Form – which, having been signed by them, set out details on their 14-day cooling off period. As I’ve said before, the PR suggested in the Letter of Complaint that Mr and Mrs C expressed some concerns at the Time of Sale about the fact that the First Allocated Property was on the 6th floor and only accessible by stairs – having been assured by the Supplier that lifts would be installed in the future when that never materialised. I’ve already explained why, in light of the PR’s response to my PD, I’m not persuaded that Mr and Mrs C’s membership was actionably misrepresented by the Supplier at the Time of Sale for reasons relating to this issue. And as there still isn’t any direct testimony from Mr and Mrs C on this point that persuades me it has merit1, I still don’t think Mr and Mrs C’s credit relationship with 1 As I said in my PD, when Mr and Mrs C were given an opportunity by the PR to set out in its questionnaire why they wanted their money back, they made no mention of the First Allocated Property (or the Second for that matter) being on the 6th and 5th floors respectively – saying instead: “We feel we have been misled, the resort has changed, the company has ceased trading so we cannot sell and get any money back.”

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Shawbrook was rendered unfair to them under Section 140A for this reason or, for that matter, any of the reasons above. But there is another issue to reconsider here and that’s the suggestion that Mr and Mrs C’s membership was marketed and sold to them as an investment in breach of a prohibition against selling timeshares in that way. The Supplier’s Alleged Breach of Regulation 14(3) of the Timeshare Regulations As I said in my PD, a share in the First and Second Allocated Properties clearly constituted an investment as they offered Mr and Mrs C 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 the one purchased by Mr and Mrs C. They just regulated how such products were marketed and sold. To conclude, therefore, that Mr and Mrs C’s membership was marketed or sold to them 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 membership offered them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. There is very limited evidence in this complaint as to whether Mr and Mrs C’s timeshare 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. I note that the PR says that Mr and Mrs C’s Fractional Rights Certificate refers to the fact that the First Allocated Property would be sold at a profit in 2030. However, I simply don’t recognise that assertion given the contents of the certificates I’ve seen. They set out the year in which the Allocated Properties are to be sold. But nowhere do they say they would be sold at a profit. The PR argues that a cheque for 2,100 Euros, written out to Mr and Mrs C not long after the Time of Sale, is evidence that their membership was sold as an investment because it was an advance on rental income promised by the Supplier. The PR also says that its letter of 20 February 2024 is evidence that membership was marketed and sold to Mr and Mrs C as an investment as its contents were approved by them. On my reading of the PR’s letter of 20 February 2024, it doesn’t appear to contain any direct testimony from Mr and Mrs C, in their own words, that allows me to assess credibility and consistency, to know precisely what was supposedly said and the context in which it was supposedly said, and, importantly, to hear from them as to what mattered to them. And in the absence of such testimony, the letter is nothing more than a set of submissions that asserts certain facts but doesn’t prove them. As for the cheque Mr and Mrs C received, the letter accompanying it says nothing about it being an advance on rental income. And as there isn’t any other evidence on file to support the PR’s assertion that was the case, I’m not persuaded it was.

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Nonetheless, with all of that said, I accept that it’s possible that Mr and Mrs C’s membership was marketed and sold to them in breach of the relevant prohibition. However, whether or not there was a breach of the relevant prohibition by the Supplier is not itself determinative of the outcome in this complaint for reasons I will come on to shortly. And with that being the case, it’s not necessary to make a formal finding on the probability of that particular issue for the purposes of this decision. Was the Credit Relationship between Shawbrook and Mr and Mrs C rendered unfair by the Supplier’s breach of Regulation 14(3)? 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 such a breach (if there was one) had on the fairness of the credit relationship between Mr and Mrs C and Shawbrook 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 C and Shawbrook 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. As I said in my PD, having read Mr and Mrs C’s answers to a number of questions the PR put to them in a questionnaire, I recognise that Mr and Mrs C said the following in response to two questions: (1) Did you purchase as a financial investment? “Yes, we were told it would go up in value as it was property.” (2) Were you told the product would hold its value? “Yes, they said it would go up.” However, it remains my view that those were leading questions as they assumed facts that hadn’t yet been established and contained the information the questions were trying to confirm. And as that ran the very real risk of colouring Mr and Mrs C’s answers, I’m not persuaded I can give them that much weight. What’s more, the only open question (relevant to this part of my decision) that the PR put to Mr and Mrs C in its questionnaire was “Why did you buy the product?” And Mr and Mrs C’s answer to that question was this: “To have holidays, to get out of an RCI pts membership and to sell early for a profit.” So, as I’ve said before, while Mr and Mrs C were interested in a share in the First Allocated Property (which isn’t surprising given the nature of the product they purchased), on my reading of their evidence, there were a number of reasons for their purchase – none of which were obviously given more weight than the others.

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On balance, therefore, even if the Supplier had marketed and sold Mr and Mrs C’s membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, 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 still don’t think the credit relationship between Mr and Mrs C and Shawbrook was unfair to them even if the Supplier had breached Regulation 14(3). Section 140A: Conclusion Given all of the factors I’ve looked at in this part of my decision, and having taken all of them into account, I’m not persuaded that the credit relationship between Mr and Mrs C and Shawbrook under the Credit Agreement and related Purchase Agreement was unfair to them. And with that being the case, I don’t think it would be fair or reasonable that I uphold this complaint on that basis. My Final Decision In conclusion, given the facts and circumstances of this complaint, I don’t think that Shawbrook acted unfairly or unreasonably when it dealt with Mr and Mrs C’s Section 75 claims. I’m not persuaded that Shawbrook 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 Shawbrook to compensate them. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs C to accept or reject my decision before 21 April 2026. Morgan Rees Ombudsman

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