Clydesdale Financial Services Limited · DRN-6203071

The complaint Miss O’s complaint is, in essence, that Clydesdale Financial Services Limited trading as Barclays Partner Finance (the ‘Lender’) acted unfairly and unreasonably by (1) being party to an unfair credit relationship with her under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’) and (2) deciding against paying claims under Section 75 of the CCA. What happened Miss O purchased membership of a timeshare (the ‘Fractional Club’) from a timeshare provider (the ‘Supplier’) on 27 August 2015 (the ‘Time of Sale’). She entered into an agreement with the Supplier to buy 900 fractional points at a cost of £14,533 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Miss O 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 her membership term ends. Miss O paid for her Fractional Club membership by taking finance of £14,533 from the Lender (the ‘Credit Agreement’). The interest-free loan was paid off at the end of its 24- month term. Miss O – using a professional representative (the ‘PR’) – wrote to the Lender on 24 April 2023 (the ‘Letter of Complaint’) to raise several different concerns. Since then, the PR has raised some further matters it says are relevant to the outcome of this complaint. As both sides are familiar with the concerns raised, it isn’t necessary to repeat them in detail here beyond the summary above. The Lender did not respond to the complaint within a reasonable time. The complaint was then referred to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, rejected the complaint on its merits. Miss O disagreed with the Investigator’s assessment and asked for an Ombudsman’s decision – which is why it was passed to me. I issued a provisional decision explaining that I was not planning to uphold the complaint. The Lender accepted my provisional decision and said it had nothing further to add. The PR disagreed with my provisional decision and provided some comments it wanted me to consider when making my final 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.

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The legal and regulatory context that I think is relevant to this complaint is no different to that shared in several hundred ombudsman decisions on very similar complaints. And with that being the case, it is not necessary to set it out here. 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. Having done so, I’ve reached the same decision as that which I outlined in my provisional findings – and for broadly the same reasons. A copy of my provisional findings is below. As such, I do not uphold this complaint. START OF COPY OF PROVISIONAL FINDINGS Section 75 of the CCA: the Supplier’s misrepresentations at the Time of Sale The CCA introduced a regime of connected lender liability under Section 75 that affords consumers (“debtors”) a right of recourse against lenders that provide the finance for the acquisition of goods or services from third-party merchants (“suppliers”) if there is an actionable misrepresentation and/or breach of contract by the supplier. Certain conditions must be met if the protection afforded to consumers is engaged, including, for instance, the cash price of the purchase and the nature of the arrangements between the parties involved in the transaction. The Lender doesn’t dispute that the relevant conditions are met. But for reasons I’ll come on to below, it isn’t necessary to make any formal findings on them here. It was said in the Letter of Complaint that Fractional Club membership had been misrepresented by the Supplier at the Time of Sale because Miss O was: 1. Told by the Supplier that Fractional Club membership had a guaranteed end date when that was not true. 2. Told by the Supplier that she owned a ‘fraction’ of the Allocated Property when that was not true as it was owned by a trustee. 3. Told by the Supplier that Fractional Club membership was an “investment” when that was not true. Neither the PR nor Miss O have set out in any detail what words and/or phrases were allegedly used by the Supplier to misrepresent Fractional Club for the reason given in points 1 or 2. However, the PR says that such representations were untrue because the Allocated Property was legally owned by a trustee and there was no indication of what duty of care it had to actively market and sell the property. Further, there is no guarantee that any sale will result at all, leaving prospective members to pay their annual management charge for an indefinite and unspecified period.

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However, I cannot see why the phrases in points 1 or 2 above would have been untrue at the Time of Sale even if they were said. It seems to me that they reflect the main thrust of the contract Miss O entered. And while, under the relevant Fractional Club Rules, the sale of the Allocated Property could be postponed for up to two years by the ‘Vendor’1, longer than that if there were problems selling and the ‘Owners’2 agreed, or for an otherwise specified period provided there was unanimous agreement in writing from the Owners, that does not render the representation above untrue. So, I am not persuaded that the representation above constituted a false statement of fact even if it was made. As for point 3, it does not strike me as a misrepresentation even if such a representation had been made by the Supplier (which I make no formal finding on). Telling prospective members that they were investing their money because they were buying a fraction or share of one of the Supplier’s properties was not untrue – nor was it untrue to tell prospective members that they would receive some money when the allocated property is sold. After all, purchasing Fractional Club membership clearly included acquiring the rights to a share of the net sale proceeds of a specific property in a specific resort. And while the PR might question the exact legal mechanism used to give prospective members that interest, it did not change the fact that they acquired such an interest. The PR has raised other matters as potential misrepresentations, but it seems to me that they are not allegations of the Supplier saying something that was untrue. Rather, it is that Miss O wasn’t told things about the way the membership worked – for example, that the obligation to pay management fees could be passed on to her children. It seems to me that these are allegations that Miss O wasn’t given all the information she needed at the Time of Sale, and I will deal with this further below. So, while I recognise that Miss O - and the PR - have concerns about the way in which Fractional Club membership was sold by the Supplier, when looking at the claim under Section 75 of the CCA, I can only consider whether there was a factual and material misrepresentation by the Supplier. For the reasons I’ve set out above, I’m not persuaded that there was. And that means that I don’t think that the Lender acted unreasonably or unfairly when it dealt with this particular Section 75 claim. Section 75 of the CCA: the Supplier’s Breach of Contract I have already summarised how Section 75 of the CCA works and why it gives consumers a right of recourse against a lender. So, it is not necessary to repeat that here other than to say that, if I find that the Supplier is liable for having breached the Purchase Agreement, the Lender is also liable. Miss O says that she could not holiday where and when she wanted to. That was framed, in the Letter of Complaint, as an alleged misrepresentation. However, on my reading of the complaint, this suggests that the Supplier was not living up to its end of the bargain, potentially breaching the Purchase Agreement. Yet, like any holiday accommodation, availability was not unlimited – given the higher demand at peak times, like school holidays, for instance. Some of the sales paperwork likely to have been signed by Miss O states that the availability of holidays was/is subject to demand. It also looks like she made use of her fractional points to holiday. So, while I accept that she may not have been able to take certain holidays, I have not seen enough to persuade me that the Supplier breached the terms of the Purchase Agreement. 1 Defined in the FPOC Rules as “CLC Resort Developments Limited”. 2 Defined in the FPOC Rules as “a purchaser who has entered into a Purchase Agreement and has been issued with a Fractional Rights Certificate (which shall include the Vendor for such period of time until the maximum number of Fractional Rights have been acquired).”

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So, from the evidence I have seen, I do not think the Lender is liable to pay Miss O any compensation for a breach of contract by the Supplier. And with that being the case, I do not think the Lender acted unfairly or unreasonably in relation to this aspect of the complaint either. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that Fractional Club membership was actionably misrepresented by the Supplier at the Time of Sale. But there are other aspects of the sales process that, being the subject of dissatisfaction, I must explore with Section 140A in mind if I’m to consider this complaint in full – which is what I’ve done next. Having considered the entirety of the credit relationship between Miss O 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. 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 Miss O and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Miss O’s complaint about the Lender being party to an unfair credit relationship was and is made for several reasons. They include allegations that: 1. Miss O was pressured by the Supplier into purchasing Fractional Club membership at the Time of Sale. 2. The right checks weren’t carried out before the Lender lent to Miss O. However, none of this strikes me as a reason why this complaint should succeed. I acknowledge that Miss O may have felt weary after a sales process that went on for a long time. But she says little about what was said and/or done by the Supplier during her sales presentation that made her feel as if she had no choice but to purchase Fractional Club

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membership when she simply did not want to. Miss O was also given a 14-day cooling off period and she have not provided a credible explanation for why she did not cancel her membership during that time. And with all of that being the case, there is insufficient evidence to demonstrate that Miss O made the decision to purchase Fractional Club membership because her ability to exercise that choice was significantly impaired by pressure from the Supplier. I haven’t seen anything to persuade me that the right checks weren’t carried out by the Lender given this complaint’s circumstances. The PR says Miss O was not employed and had no income at the Time of Sale. But this is contradicted by her own credit application from the time, in which said she was employed (and had been for over two years), was earning £22,000 per year and lived at home with her parents (suggesting she had no housing costs such as rent). But 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 Miss O was actually unaffordable before also concluding that she lost out as a result and then consider whether the credit relationship with the Lender was unfair to her for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Miss O. Indeed, she made every monthly repayment during the 24-month loan term. Overall, therefore, I don’t think that Miss O’s credit relationship with the Lender was rendered unfair to her under Section 140A for any of the reasons above. But there is another reason why the PR now says the credit relationship with the Lender was unfair to her. And that’s the suggestion that Fractional Club membership was marketed and sold to her 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 Miss O’s Fractional Club membership met the definition of a “timeshare contract” and was a “regulated contract” for the purposes of the Timeshare Regulations. Regulation 14(3) of the Timeshare Regulations prohibited the Supplier from marketing or selling Fractional Club membership as an investment. This is what the provision said at the Time of Sale: “A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.” But the PR and Miss O say that the Supplier did exactly that at the Time of Sale – saying, in summary, that she was told by the Supplier that Fractional Club 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 provisional decision, and by reference to the decided authorities, an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. A share in the net sale proceeds of the Allocated Property could constitute an investment as it offered Miss O the prospect of a financial return – whether or not, like all investments, that was more than what she 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

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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.3 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 Miss O 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 her as an investment, i.e. told her or led her to believe that Fractional Club membership offered her the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. There is competing evidence in this complaint as to whether Fractional Club membership was marketed and/or sold by the Supplier at the Time of Sale as an investment in breach of regulation 14(3) of the Timeshare Regulations. On the one hand, the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective purchasers, such as Miss O, 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 think that the Supplier’s sales process left open the possibility that the sales representative may have positioned Fractional Club membership as an investment. So, I accept that it’s equally possible that Fractional Club membership was marketed and sold to Miss O as an investment in breach of Regulation 14(3). However, whether 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 Miss O 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 Miss O 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 Miss O and the Lender that was unfair to her and warranted relief as a result, it is important for me to consider whether the Supplier’s breach of Regulation 14(3) led her to enter into the Purchase Agreement and the Credit Agreement. 3 The PR has argued that Fractional Club membership amounted to an Unregulated Collective Investment Scheme, however this was considered and rejected in 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).

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On my reading of the evidence before me, the prospect of a financial gain from Fractional Club membership was not an important and motivating factor when Miss O decided to go ahead with her purchase. I say this for the following reasons. The PR has provided a statement dated 15 January 2024.This had Miss O’s name on as well as her parents (who were both named on the Purchase Agreement) but is unsigned. The statement appears to have been written by one of Miss O’s parents – since it refers to her as “my daughter”. It says that: “The presentation took the whole day because they had a very long speech, where they promised a lot of things that they will do if we buy the piece of their property where we will get our money back when the property is sold.” So, it appears that Miss O was told she would get her money back on the sale of the Allocated Property. The statement does not indicate that Miss O held out the hope or expectation of making a profit from the purchase. If that had been the case and this was material to her decision to buy, I would expect this to be made clear in the statement. But that is not the case. I note that the PR has also provided a call note dated 6 December 2022. This was taken when speaking to one of Miss O’s parents. While the sale was discussed, there is no mention of the benefit of getting money back upon the sale of the Allocated Property. The only benefits discussed were holiday benefits and that they were disappointed in what was available after they became members. The PR also provided a webform submission and questionnaire from the timeshare advice company that referred Miss O to the PR. The webform describes the Fractional Club membership as a “Fractional timeshare investment”. But it is one sentence and does not expand on in what way it was an investment (for example it could be seen as an investment in future holidays, as well as a financial investment). So, it is not clear from this that Miss O saw it as an investment (as defined above) nor that this was material to her decision to purchase. The questionnaire was not written by Miss O but by the timeshare advice company. This says Miss O was told she would “get great holidays at any time & get money at end instead of just booking (which [would] be wasted).” It goes on to say, “Don’t think they will get the profit at end.” This may suggest the Supplier did sell or market Fractional Club membership as an investment. But the statement mentioned above appears to be the closest we have to direct testimony from Miss O. And given it does not mention that she held out the hope or expectation of making a profit, nor that this was material to her decision to purchase Fractional Club membership, I cannot fairly and reasonably conclude that it was, nor that her relationship with the Lender was unfair to her as a result. That doesn’t mean Miss O wasn’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 the evidence in this complaint doesn’t persuade me that her purchase was motivated by her share in the Allocated Property and the possibility of a profit. As such, I don’t think a breach of Regulation 14(3) by the Supplier was likely to have been material to the decision she ultimately made. On balance, therefore, even if the Supplier marketed or sold Fractional Club membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, I am not persuaded that Miss O’s decision to purchase Fractional Club membership at the Time of Sale was motivated by the prospect of a financial gain (i.e., a profit). On the contrary, I think the evidence suggests she would have pressed ahead with her purchase regardless of

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whether there had been a breach of Regulation 14(3). And for that reason, I do not think the credit relationship between Miss O and the Lender was unfair to her even if the Supplier did breach Regulation 14(3). The provision of information by the Supplier at the Time of Sale The PR says that Miss O was not given sufficient information at the Time of Sale by the Supplier about Fractional Club membership, including about the ongoing costs and the fact that Miss O’s heirs could inherit these costs. 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 acknowledge that it is also possible that the Supplier did not give Miss O sufficient information, in good time, on the various charges she could have been subject to as Fractional Club 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. And as neither Miss O nor the PR have persuaded me that she would not have pressed ahead with her purchase had the finer details of the Fractional Club’s ongoing costs 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 argument that Miss O’s heirs would inherit the on-going management charges, I fail to see how that could be the case or that it could have led to an unfairness that warrants a remedy. Miss O’s Commission Complaint One of the PR’s concerns relates to alleged payments of commission by the Lender to the Supplier for acting as a credit broker and arranging the Credit Agreement. But in this case no commission was paid, and I see no reason why the commission arrangements between the Lender and the Supplier should cause me to uphold this complaint. END OF COPY OF PROVISIONAL FINDINGS The PR’s response to my provisional findings about an unfair relationship 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. The PR’s further comments in response to the provisional decision only relate to the issue of whether the credit relationship between Miss O and the Lender was unfair. In particular, the PR has provided further comments in relation to whether the membership was sold to Miss O as an investment at the Time of Sale and that it was unreasonable to lend to Miss O when her parents could not afford the loan.

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As outlined in my provisional decision, the PR originally raised various other points of complaint, all of which I addressed at that time. But they didn’t make any further comments in relation to those in their response to my provisional decision. Indeed, they haven’t said they disagree with any of my provisional conclusions in relation to those other points. And since I haven’t been provided with anything more in relation to those other points by either party, I see no reason to change my conclusions in relation to them as set out in my provisional decision. So, I’ll focus here on the PR’s points raised in response. The PR has provided further comments which relate to whether Fractional Club membership was marketed or sold as an investment in breach of the prohibition in Regulation 14(3) of the Timeshare Regulations and whether this was material to Miss O’s decision to purchase. However, as I explained in my provisional decision, while the Supplier’s sales processes left open the possibility that the sales representative may have positioned Fractional Club membership as an investment, it isn’t necessary to make a finding on this as it is not determinative of the outcome of the complaint. I explained that Regulatory breaches do not automatically create unfairness and that such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. The PR’s comments do not persuade me that I should uphold Miss O’s complaint, because they do not make me think it’s any more likely that the Supplier’s breach of Regulation 14(3) led Miss O to enter into the Purchase Agreement and the Credit Agreement. In my provisional decision, I explained the reasons why I didn’t think Miss O’s purchase was motivated by the prospect of a financial gain (i.e., a profit). And although I have carefully considered the PR’s arguments in response to this, I’m not persuaded the conclusions I reached on this point were unfair or unreasonable. The PR says that Miss O’s parents could not afford the loan and failed credit checks before Miss O applied for the loan. It suggests that this in some way makes Miss O’s relationship with the Lender unfair. But I can see that Miss O, an employed adult, was named on the Purchase Agreement alongside her parents. And I am not persuaded that she (and her parents for that matter) were not comfortable with her taking out the loan to pay for the purchase at the Time of Sale. If she (or her parents) had not been comfortable with that, she could have declined to make the purchase and/or refused to apply for the loan.4 So, ultimately, for the above reasons, along with those I already explained in my provisional decision, I remain unpersuaded that any breach of Regulation 14(3) was material to Miss O’s purchasing decision. And for that reason, I do not think the credit relationship between Miss O and the Lender was unfair to Miss O even if the Supplier had breached Regulation 14(3). Conclusion In conclusion, I do not think that the Lender acted unfairly or unreasonably when it dealt with the relevant Section 75 claims, and I am not persuaded that the Lender was party to a credit relationship with Miss O under the Credit Agreement that was unfair to her for the purposes of Section 140A of the CCA – nor do I see any other reason why it would be fair or reasonable to direct the Lender to compensate Miss O. My final decision For the reasons I’ve explained, I do not uphold this complaint. 4 In the PR’s response to my provisional decision, it said Miss O’s income was £15,000. But as mentioned in my provisional findings, on the credit application she declared her income to be £22,000.

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Under the rules of the Financial Ombudsman Service, I’m required to ask Miss O to accept or reject my decision before 7 April 2026. Phillip Lai-Fang Ombudsman

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