Shawbrook Bank Limited · DRN-6257525

The complaint Mr S’s complaint is, in essence, that Shawbrook Bank Limited (the ‘Lender’) acted unfairly and unreasonably by being party to an unfair credit relationship with him under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’). The loan in question was taken out in Mr S’s sole name and as such, he is the only eligible complainant here. But as the timeshare purchased using the loan was taken out in the joint names of Mr S and Miss W, I’ll refer to them both throughout where appropriate. What happened Mr S and Miss W were members of a timeshare provider (the ‘Supplier’) – having purchased a number of products from it over time. But the product at the centre of this complaint is their membership of a timeshare that I’ll call the ‘Signature Collection’ – which they bought on 12 November 2019 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy 1,820 Signature Collection points at a cost of £17,511 (the ‘Purchase Agreement’). Signature Collection membership was asset backed – which meant it gave Mr S and Miss W more than just holiday rights. It also included a share in the net sale proceeds of a property named on the Purchase Agreement (the ‘Allocated Property’) after their membership term ends. Mr S and Miss W paid for their Signature Collection membership by taking finance of £17,511 from the Lender (the ‘Credit Agreement’) in Mr S’s name only. Mr S – using a professional representative (the ‘PR’) – wrote to the Lender on 16 June 2023 (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 ultimately did not send a response to the complaint. So, it was then referred to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, rejected the complaint on its merits. Mr 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’). In that decision I said: “Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that Signature Collection membership was actionably misrepresented by the Supplier at the Time of Sale. But there are other aspects of the sales process that, being the subject of dissatisfaction, I must explore with Section 140A in mind if I’m to consider this complaint in full – which is what I’ve done next.

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However, having considered the entirety of the credit relationship between 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 6. Any existing unfairness from a related credit agreement. I have then considered the impact of these on the fairness of the credit relationship between Mr S and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mr S’s complaint about the Lender being party to an unfair credit relationship was and is made for several reasons. The PR says that there was one or more unfair contract terms in the Purchase Agreement. But as I can’t see that any such terms were operated unfairly against Mr S and Miss W in practice, nor that any such terms led them to behave in a certain way to their detriment, I’m not persuaded that any of the terms governing Signature Collection membership are likely to have led to an unfairness that warrants a remedy. Overall, therefore, I don’t think that Mr S’s credit relationship with the Lender was rendered unfair to him under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR says the credit relationship with the Lender was unfair to him. And that’s the suggestion that Signature Collection membership was marketed and sold to him and Miss W as an investment in breach of prohibition against selling timeshares in that way. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mr S and Miss W’s Signature Collection 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 Signature Collection membership as an investment. This is what the provision said at the Time of Sale: “A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.” But the PR says that the Supplier did exactly that at the Time of Sale. The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this provisional decision, and by reference to the decided authorities, an investment is a

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transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. A share in the Allocated Property clearly constituted an investment as it offered Mr S and Miss W 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 Signature Collection 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 Signature Collection. They just regulated how such products were marketed and sold. To conclude, therefore, that Signature Collection membership was marketed or sold to Mr S and Miss W 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 Signature Collection membership offered them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. There is competing evidence in this complaint as to whether Signature Collection membership was marketed and/or sold by the Supplier at the Time of Sale as an investment in breach of regulation 14(3) of the Timeshare Regulations. On the one hand, it is clear that the Supplier made efforts to avoid specifically describing membership of the Signature Collection as an ‘investment’ or quantifying to prospective purchasers, such as Mr S and Miss W, 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. On the other hand, I acknowledge that the Supplier’s sales process left open the possibility that the sales representative may have positioned Signature Collection membership as an investment. So, I accept that it’s equally possible that Signature Collection membership was marketed and sold to Mr S and Miss W as an investment in breach of Regulation 14(3). However, whether or not there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome in this complaint for reasons I will come on to shortly. And with that being the case, it’s not necessary to make a formal finding on that particular issue for the purposes of this decision. Was the credit relationship between the Lender and the Consumer rendered unfair? Having found that it was possible that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I now need to consider what impact that breach had on the fairness of the credit relationship between Mr 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 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 and Miss W to enter

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into the Purchase Agreement and him into the Credit Agreement is an important consideration. Mr S and Miss W have provided a witness statement which is signed and dated 9 June 2023. Describing what happened at this Time of Sale, I note they’ve said: “The [Supplier] sales rep, explained to us that there were only two units left and that the Tenerife local Government were investing millions of euro's [sic] into the area which would mean that investing there would return significantly more profit than the fractional share we had already purchased. We were told that if we traded in our current share, and upgraded to this building, it would be worth double, maybe triple when the building was sold owing to the local area improvements. […] Based on the information we had been given, we felt our investment would grow more impressively if we traded in our current share at the [Supplier resort] and upgraded to the one on offer at [other Supplier resort].” Part of my assessment of the testimony provided is to consider when it was written. I’m conscious that it was drafted after the judgment in 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) (‘Shawbrook & BPF v FOS’) was handed down. The PR has referenced this and so I think it’s clear they and Mr S and Miss W were aware of a case with similar circumstances which was upheld, as well as the reasons for that. So, I think there’s a real risk that Mr S and Miss W’s recollections were influenced by that. I accept that Mr S and Miss W’s testimony indicates that they believe Signature Collection membership was marketed and sold to them as an investment. That, however, doesn’t necessarily speak to their motivations in making the purchase. I note that they’ve gone on to describe that they were initially reluctant to make the purchase, until the Supplier offered them three free upgrades. They also raised some concerns about having to buy a week in December, as due to the nature of Mr S’s employment he wouldn’t generally be able to go holiday at that time. They’ve said that the Supplier resolved this concern by explaining they could exchange the week. And, they’ve said that “as all of our objections appeared to have been dealt with, we decided to proceed”. This doesn’t suggest to me that they purchased based on the prospect of a financial gain but rather, they purchased based on the free upgrades they were offered and the Supplier resolving their concerns about the timing of holidays. Indeed, this seems to be why Mr S and Miss W are unhappy with the membership now, as they’ve gone on to say: “After proceeding with this purchase, we have never once been able to use the free upgrades we were promised. A company called Wyndham took over the resort and during our first stay since that takeover, we noticed the concierge service had been cancelled. This was a service we had particularly enjoyed. The exclusive, luxury, owner only experience was gone, and we found ourselves holidaying alongside people that had booked a one-off holiday online. This is not what we had signed up for.

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The exclusivity had gone. The luxury element had disappeared. When we tried to book a further holiday by telephone, we were told that there was no availability for us. We explained that we were owners, and this shouldn't be possible. Jonathan was on the Wyndham website while he was on the call and there was plenty of availability on their website at exactly the time we wanted to travel. The operator explained there was availability for Wyndham customers, but not for CLC owners. This was sickening. There was so much availability online, and even after investing so much of our money, and borrowing further to upgrade our ownership they kept telling us, they are not available for us. Not once have we been able to use our free upgrades which were promised to us at the time we committed to buying our fraction.” So based on what Mr S and Miss W have had to say here, it seems likely they made their purchased based on the holidays the membership could provide, particularly the luxury element that Signature Collection membership in particular offered. And, the free upgrades they were offered at the Time of Sale. In response to the Investigator’s view, Mr S provided a further witness statement. This was fairly brief and the main purpose of this statement was to explain that he now wished to add the sentence: “if the salesman had told me that the Signature Collection membership had no investment aspect, I would not have purchased the product”. I’ve considered this, but it’s ultimately difficult to explain why Mr S and Miss W did not mention this in their original statement. Given the timing of when this was provided i.e. following both the aforementioned judgment in Shawbrook & BPF v FOS and the Investigator’s findings, I think there is a very real risk this has also been influenced by one or both of those. I’m therefore simply not able to place much, if any, weight on Mr S’s further comment here. So overall, on my reading of the evidence before me, the prospect of a financial gain from Signature Collection membership was not an important and motivating factor when Mr S and Miss W decided to go ahead with their purchase. That doesn’t mean they weren’t interested in a share in the Allocated Property. After all, that wouldn’t be surprising given the nature of the product at the centre of this complaint. But as Mr S himself doesn’t persuade me that their purchase was motivated by their share in the Allocated Property and the possibility of a profit, I don’t think a breach of Regulation 14(3) by the Supplier was likely to have been material to the decision they ultimately made. On balance, therefore, even if the Supplier had marketed or sold the Signature Collection membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, I am not persuaded that Mr S and Miss W’s decision to purchase Signature Collection membership at the Time of Sale was motivated by the prospect of a financial gain (i.e., a profit). On the contrary, I think the evidence suggests they would have pressed ahead with their purchase whether or not there had been a breach of Regulation 14(3). And for that reason, I do not think the credit relationship between Mr S and the Lender was unfair to him even if the Supplier had breached Regulation 14(3). The provision of information by the Supplier at the Time of Sale The PR says that Mr S and Miss W were not given sufficient information at the Time of Sale by the Supplier about the ongoing costs of Signature Collection membership.

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As I’ve already indicated, the case law on Section 140A makes it clear that it does not automatically follow that regulatory breaches create unfairness for the purposes of the unfair relationship provisions. The extent to which such failures render a credit relationship unfair must also be determined according to their impact on the complainant. I acknowledge that it is also possible that the Supplier did not give Mr S and Miss W sufficient information, in good time, on the various charges they could have been subject to as Signature Collection members in order to satisfy the requirements of Regulation 12 of the 2010 Timeshare Regulations (which was concerned with the provision of ‘key information’). But even if that was the case, I cannot see that the ongoing costs of membership were applied unfairly in practice. And as neither Mr S and Miss W nor the PR have persuaded me in this particular case that they would not have pressed ahead with their purchase had those details been disclosed by the Supplier in compliance with Regulation 12, I cannot see why any failings in that regard are likely to be material to the outcome of this complaint given its facts and circumstances. As for the PR’s assertion that that if the degree of the various ongoing costs had been expressly made known by the Supplier then “any right-minded individual” would not have entered into the agreement, given what I’ve said above, particularly about the way the ongoing costs of membership were applied, I don’t think such a generalisation can be made in this case. I note that the PR requested details of any commission paid by the Lender to the Supplier and reserved Mr S’s position until it received the information. I’ve therefore considered whether or not the commission payment rendered the credit relationship unfair. As both sides already know, the Supreme Court handed down an important judgment on 1 August 2025 in a series of cases concerned with the issue of commission: Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd [2025] UKSC 33 (‘Hopcraft, Johnson and Wrench’). The Supreme Court ruled that, in each of the three cases, the commission payments made to car dealers by lenders were legal, as claims for the tort of bribery, or the dishonest assistance of a breach of fiduciary duty, had to be predicated on the car dealer owing a fiduciary duty to the consumer, which the car dealers did not owe. A “disinterested duty”, as described in Wood v Commercial First Business Ltd & ors and Business Mortgage Finance 4 plc v Pengelly [2021] EWCA Civ 471, is not enough. However, the Supreme Court held that the credit relationship between the lender and Mr Johnson was unfair under Section 140A of the CCA because of the commission paid by the lender to the car dealer. The main reasons for coming to that conclusion included, amongst other things, the following factors: 1. The size of the commission (as a percentage of the total charge for credit). In Mr Johnson’s case it was 55%. This was “so high” and “a powerful indication that the relationship…was unfair” (see paragraph 327); 2. The failure to disclose the commission; and 3. The concealment of the commercial tie between the car dealer and the lender. The Supreme Court also confirmed that the following factors, in what was a non-exhaustive list, will normally be relevant when assessing whether a credit relationship was/is unfair under Section 140A of the CCA:

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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 Mr S in arguing that his credit relationship with the Lender was unfair to him for reasons relating to commission given the facts and circumstances of this 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 Mr S, nor have I seen anything that persuades me that the commission arrangement between them gave the Supplier a choice over the interest rate that led Mr S into a credit agreement that cost disproportionately more than it otherwise could have. I acknowledge that it’s possible that the Lender and the Supplier failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. But as I’ve said before, the case law on Section 140A makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. And with that being the case, it isn’t necessary to make a formal finding on that because, even if the Lender and the Supplier failed to follow the relevant regulatory guidance at the Time of Sale, it is for the reasons set out below that I don’t think any such failure is itself a reason to find the credit relationship in question unfair to Mr S. In stark contrast to the facts of Mr Johnson’s case, the amount of commission paid by the Lender to the Supplier for arranging the Credit Agreement that Mr S entered into wasn’t high. At £875.55, it was only 5% of the amount borrowed and even less than that (4.6%) as a proportion of the charge for credit. So, had he known at the Time of Sale that the Supplier was going to be paid a flat rate of commission at that level, I’m not currently persuaded that he either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mr S wanted Signature Collection membership and had no obvious means of his own to pay for it. And at such a low level, the impact of commission on the cost of the credit he needed for a timeshare he wanted doesn’t strike me as disproportionate. So, I think he would still have taken out the loan to fund his purchase at the Time of Sale had the amount of commission been disclosed. What’s more, based on what I’ve seen so far, the Supplier’s role as a credit broker wasn’t a separate service and distinct from its role as the seller of timeshares. It was simply a means

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to an end in the Supplier’s overall pursuit of a successful timeshare sale. I can’t see that the Supplier gave an undertaking – either expressly or impliedly – to put to one side its commercial interests in pursuit of that goal when arranging the Credit Agreement. And as it wasn’t acting as an agent of Mr S but as the supplier of contractual rights he and Miss W obtained under the Purchase Agreement, the transaction doesn’t strike me as one with features that suggest the Supplier had an obligation of ‘loyalty’ to him when arranging the Credit Agreement and thus a fiduciary duty. Overall, therefore, 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 to Mr S and Miss W. 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 S and the Lender under the Credit Agreement and related Purchase Agreement was unfair to him. And as things currently stand, I don’t think it would be fair or reasonable that I uphold this complaint on that basis. Commission: The Alternative Grounds of Complaint While I’ve found that Mr S’s credit relationship with the Lender wasn’t unfair to him for reasons relating to the commission arrangements between it and the Supplier, two of the grounds on which I came to that conclusion also constitute separate and freestanding complaints to Mr S’s complaint about an unfair credit relationship. So, for completeness, I’ve considered those grounds on that basis here. The first ground relates to whether the Lender is liable for the dishonest assistance of a breach of fiduciary duty by the Supplier because it took a payment of commission from the Lender without telling Mr S (i.e., secretly). And the second relates to the Lender’s compliance with the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between them. However, for the reasons I set out above, I’m not persuaded that the Supplier – when acting as credit broker – owed Mr S a fiduciary duty. So, the remedies that might be available at law in relation to the payment of secret commission aren’t, in my view, available to him. And while it’s possible that the Lender failed to follow the regulatory guidance in place at the Time of Sale insofar as it was relevant to disclosing the commission arrangements between it and the Supplier, I don’t think any such failure on the Lender’s part is itself a reason to uphold this complaint because, for the reasons I also set out above, I think he would still have taken out the loan to fund his purchase at the Time of Sale had there been more adequate disclosure of the commission arrangements that applied at that time.” In conclusion, I was not persuaded that the Lender was party to a credit relationship with Mr S under the Credit Agreement that was unfair to him for the purposes of Section 140A of the CCA – nor could I see any other reason why it would be fair or reasonable to direct the Lender to compensate him. The Lender accepted my provisional decision. Neither the PR nor Mr S responded, nor did they provide any further evidence or comments they wished to be considered. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and

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reasonable in the circumstances of this complaint. As neither party has provided any new evidence or arguments, I don’t believe there is any reason for me to reach a different conclusion from that which I reached in my provisional decision (outlined above). I do wish to stress that I have considered all the evidence and arguments afresh before reaching that conclusion. My final decision For the above reasons, I do not 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 27 April 2026. Fiona Mallinson Ombudsman

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