Clydesdale Financial Services Limited · DRN-6203809

The complaint Mr M’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 him under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’) and (2) deciding against paying a claim under Section 75 of the CCA. What happened Mr M was the member 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 his membership of a timeshare that I’ll call the ‘Fractional Club’ – which he bought with his wife, Mrs M, on 15 November 2017 (the ‘Time of Sale’). They entered into an agreement with the Supplier at a cost of £27,950 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Mr M 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 his membership term ends. Mr M paid for his Fractional Club membership by taking finance of £27,950 from the Lender (the ‘Credit Agreement’) in his sole name. Mr M – using a professional representative (the ‘PR’) – wrote to the Lender on 12 March 2024 (the ‘Letter of Complaint’) to raise a number of different concerns. Since then the PR has raised some further matters it says are relevant to this outcome of the 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 complaint was ultimately 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 M 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: ‘The legal and regulatory context In considering what is fair and reasonable in all the circumstances of the complaint, I am required under DISP 3.6.4R to take into account: relevant (i) law and regulations; (ii) regulators’ rules, guidance and standards; and (iii) codes of practice; and (where appropriate), what I consider to have been good industry practice at the relevant time. The legal and regulatory context that I think is relevant to this complaint is 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.

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What I’ve provisionally decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done that, I do not currently think this complaint should be upheld. However, before I explain why, I want to make it clear that my role as an Ombudsman is not to address every single point that has been made to date. Instead, it is to decide what is fair and reasonable in the circumstances of this complaint. So, 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 misrepresentations at the Time of Sale Section 75 creates a financial liability that the creditor is bound to pay. Liability under Section 75 isn’t based on anything the lender does wrong, but upon the misrepresentations and breaches of contract by the supplier, for which Section 75 imposes on the lender a “like claim” to that which the borrower enjoys against the supplier. If the lender is notified of a valid Section 75 claim, it should pay its liability. And if it fails or refuses to do so, that failure or refusal can give rise to a complaint to the Financial Ombudsman Service. 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 Limitation Act 1980 (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 Mr M’s Section 75 claim for misrepresentation was time-barred under the LA before he 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. And 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. And 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 was the Time of Sale. I say this because Mr M entered into the purchase of his timeshare at that time based on the alleged misrepresentations of the Supplier – which he says were relied upon. And as the loan from the Lender was used to help finance the purchase, it was when he entered into the Credit Agreement that he suffered a loss. Mr M first notified the Lender of his Section 75 claim on 12 March 2024. And as 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 not to accept Mr M’s concerns about the Supplier’s alleged misrepresentations. 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.

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Having considered the entirety of the credit relationship between Mr M 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. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; 4. The inherent probabilities of the sale given its circumstances; and 5. 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 M and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mr M’s complaint about the Lender being party to an unfair credit relationship was and is made for several reasons. They include allegations that: 1. the right checks weren’t carried out before the Lender lent to Mr M. 2. the Credit Agreement was arranged by a broker acting outside of its authorisation. However, as things currently stand, neither of these strike me as reasons why this complaint should succeed. I haven’t seen anything to persuade me that the right checks weren’t carried out by the Lender given this complaint’s circumstances. 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 Mr M was actually unaffordable before also concluding that he lost out as a result and then consider whether the credit relationship with the Lender was unfair to him for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mr M. 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. However, it looks to me like Mr M knew, amongst other things, how much he was borrowing and repaying each month, who he was borrowing from and that he was borrowing money to pay for Fractional Club membership. And as the lending doesn’t look like it was unaffordable for him, even if the Credit Agreement was arranged by a broker that didn’t have the necessary permission to do so (which I make no formal finding on), I can’t see why that led to Mr M’s financial loss – such that I can say that the credit relationship in question was unfair on him as a result. And with that being the case, I’m not persuaded that it would be fair or reasonable to tell the Lender to compensate him, even if the loan wasn’t arranged properly. Overall, therefore, I don’t think that Mr M’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 now says the credit relationship with the Lender was

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unfair to him. And that’s the suggestion that Fractional Club membership was marketed and sold to him 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 M’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 says that the Supplier did exactly that at the Time of Sale – saying, in summary, that Mr M 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 Allocated Property clearly constituted an investment as it offered Mr M the prospect of a financial return – whether or not, like all investments, that was more than what he first put into it. But it is important to note at this stage that the fact that Fractional Club membership included an investment element did not, itself, transgress the prohibition in Regulation 14(3). That provision prohibits the marketing and selling of a 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.1 In other words, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. To conclude, therefore, that Fractional Club membership was marketed or sold to Mr M 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 him as an investment, i.e. told him or led him to believe that Fractional Club membership offered him 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, it is clear that the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective purchasers, such as Mr M, the financial value of his share in the net sales proceeds of the 1 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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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 Fractional Club membership as an investment. So, I accept that it’s equally possible that Fractional Club membership was marketed and sold to Mr M 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 Mr M 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 M 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 M and the Lender that was unfair to him and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led him to enter into the Purchase Agreement and the Credit Agreement is an important consideration. But 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 Mr M decided to go ahead with his purchase. I say this having reviewed Mr and Mrs M’s signed and dated written statement of March 2024. The statement included the following: ‘In 2017 we bought a 25th share. It was supposed to be an investment for the kids, but we have since been told by someone that [the Supplier] kept 10% of the property so it couldn’t or wouldn’t be sold.’ The above statement suggests that Mr M understood that Fractional Club membership included an investment element. But it’s not clear from what Mr M says he understood of the investment aspect how much he thought he personally stood to receive as a return on his outlay or whether this might result in a profit for him. I’ve also reviewed the handwritten call notes the PR’s provided dated 31 October 2023. However, they broadly echo the contents of the written statement and add very little to what Mr M understood of the investment aspect. That doesn’t mean Mr M 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 as Mr M himself doesn’t persuade me that his purchase was motivated by his 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 he ultimately made. On balance, therefore, even if the Supplier had marketed or sold the Fractional Club membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, I am not persuaded that Mr M’s decision to purchase Fractional Club membership at the Time

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of Sale was motivated by the prospect of a financial gain (i.e., a profit). On the contrary, I think the evidence suggests he would have pressed ahead with his 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 M 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 I’ve thought about whether Mr M was given sufficient information at the Time of Sale by the Supplier about membership, including about the ongoing costs of Fractional Club membership. 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 Mr M sufficient information, in good time, on the various charges he 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 Mr M nor the PR have persuaded me that he would not have pressed ahead with his 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. Conclusion In conclusion, as things currently stand, I do not think that the Lender acted unfairly or unreasonably when it dealt with the relevant Section 75 claim. And I am not persuaded that the Lender was party to a credit relationship with Mr M under the Credit Agreement that was unfair to him 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 him.’ The Lender confirmed its acceptance of the PD and that it had nothing further to add. The PR also responded – it did not accept the PD and provided some further comments and evidence it wished to be considered. Having received the relevant responses from both parties, I’m now finalising my 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. Following the responses from both parties, I’ve considered the case afresh and having done so, I’ve reached the same decision as that which I outlined in my provisional findings, for broadly the same reasons. Again, my role as an Ombudsman isn’t to address every single point which has been made to date, but to decide what is fair and reasonable in the circumstances of this complaint. If I haven’t commented on, or referred to, something that either party has said, this doesn’t

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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 PD only relate to the issue of whether the credit relationship between Mr M and the Lender was unfair. In particular, the PR has provided further comments in relation to whether the membership was sold to Mr M as an investment at the Time of Sale. As outlined in my PD, the PR originally raised various other points of complaint, all of which I addressed at that time. But it didn’t make any further comments in relation to those in its response to my PD. Indeed, it hasn’t said it disagrees with any of my provisional conclusions in relation to those other points. On that basis, I see no reason to change my conclusions in relation to them as set out in my PD. So, I’ll focus here on the PR’s points raised in response. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The PR has provided its further thoughts as to Mr M’s likely motivations for purchasing Fractional Club membership. I recognise it has interpreted Mr M’s testimony differently to how I have and thinks it points to him having been motivated by the prospect of a financial gain from Fractional Club membership. But I’m not persuaded that the evidence supports the PR’s position on the matter. In my provisional decision I explained the reasons why I didn’t think Mr M’s purchase was motivated by the prospect of a financial gain (i.e., a profit). The PR says that, when considered as a whole, the evidence demonstrates he was induced into the Purchase and Credit Agreements by the promise of an investment that would bring a profit. Although I have carefully considered the PR’s arguments in this regard, including the additional context it’s attempted to provide, I’m not persuaded the conclusion I reached on this point was unfair or unreasonable. I still think it reasonable to place emphasis on Mr M’s written statement as being the truest reflection of his – and Mrs M’s – recollections of the Time of Sale. And the written statement is unclear as to what Mr M understood of the return his investment might provide. The other evidence the PR points to as being supportive of the complaint such as the handwritten call notes is, in my view, equally unclear on the issue. The PR says my interpretation of the word ‘profit’ is contrary to its natural meaning, the manner in which the membership was marketed by the Supplier and Mr M’s own explanation of what he says happened. But, as I said in my PD, I have applied the meaning attached to it in the relevant and important case of 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). So, ultimately, for the above reasons, along with those I already explained in my PD, I remain unpersuaded that any breach of Regulation 14(3) was material to Mr M’s purchasing decision. And for that reason, I do not think the credit relationship between Mr M and the Lender was unfair to him even if the Supplier had breached Regulation 14(3). S140A conclusion

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Given all of the factors I’ve looked at in this part of my decision, including the relevant relationships, arrangements and payments between the Lender and the Supplier and having taken all of them into account, I’m not persuaded that the credit relationship between Mr M and the Lender under the Credit Agreement and related Purchase Agreement was unfair to him. So, I don’t think it is fair or reasonable that I uphold this complaint on that basis. Overall conclusion In conclusion, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mr M’s Section 75 claim. I am not persuaded that the Lender was party to a credit relationship with him under the Credit Agreement and related Purchase Agreement that was unfair to him 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 the Lender to compensate him. My final decision For these reasons, my final decision is that I don’t uphold the complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 3 April 2026. Nimish Patel Ombudsman

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