First Holiday Finance Limited · DRN-5784174

The complaint Mrs A and Ms M’s complaint is, in essence, that First Holiday Finance Limited (the ‘Lender’) acted unfairly and unreasonably by (1) being party to an unfair credit relationship with them under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’) and (2) deciding against paying a claim under Section 75 of the CCA. What happened In March 2016, Mrs A and Ms M purchased a ‘Fractional Club’ membership from a timeshare provider (the ‘Supplier’). This timeshare membership was asset backed – which meant it included a share of the net sale proceeds of a property named on the purchase agreement (the ‘Allocated Property’) after the membership term ended. Mrs A and Ms M put down £500 at the time and borrowed £16,175 from the Lender to buy the membership. The loan was payable over 144 months at £230.52 per month, and the total amount payable was £33,194. In June 2023, the complainants used a professional representative (‘PR’) to complain about the purchase and the related loan. It was said in the Letter of Complaint that the membership had been misrepresented by the Supplier and also that the credit relationship was unfair because of a number of failings. The Letter of Complaint, in summary, said that Mrs A and Ms M: 1. Were only provided with the contractual documents at the end of the long sales meeting where they were rushed into signing them, and were not given time to properly consider the implications of the timeshare contract as a whole 2. Contrary to the assurances made by the sales representative the Supplier they have been unable to access the holidays that they were led to believe the timeshare contract would entitle them to 3. Told they had purchased an investment that would appreciate in value when that was not true. 4. Given incorrect information about the ongoing maintenance fees. The Lender rejected the complaint on all grounds. Dissatisfied with the Lender’s response, the PR referred the complaint to the Financial Ombudsman Service. One of our investigators looked into the complaint and issued a ‘view’ saying they didn’t think we should uphold the complaint in Mrs A and Ms M’s favour. Because their PR didn’t agree with the outcome, the complaint was passed to me for an ombudsman’s 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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I would add that the following regulatory rules/guidance are also relevant. The Consumer Credit Sourcebook (‘CONC’) – Found in the Financial Conduct Authority’s (the ‘FCA’) Handbook of Rules and Guidance Below are the most relevant provisions and/or guidance as they were at the relevant time: • CONC 3.7.3 [R] • CONC 4.5.3 [R] • CONC 4.5.2 [G] The FCA’s Principles The rules on consumer credit sit alongside the wider obligations of firms, such as the Principles for Businesses (‘PRIN’). Set out below are those that are most relevant to this complaint: • Principle 6 • Principle 7 • Principle 8 What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done this, and for the same reasons already explained by our investigator, I am not upholding this complaint. I am very sorry to disappoint the complainants. The Section 75 Complaint When a complaint is referred to the Financial Ombudsman Service on the back of an unsuccessful attempt to advance a Section 75 claim, the act or omission that engages the Service’s jurisdiction is different to the considerations under Section 140A. It is the time of the creditor’s refusal to accept and pay the debtor’s claim which is relevant, rather than anything that occurs before the claim was put to the creditor. As a result, the standard jurisdiction rules which the Financial Ombudsman Service typically works to – the 6 and 3 year time limits (under DISP 2.8.2 (2) R) - don’t usually start until the respondent firm answers and refuses the Section 75 claim. What this means is that I can consider Mrs A and Ms M’s complaint under Section 75. However, as our investigator has already explained, the Lender has a defence to the claim under the Limitation Act 1980 (LA). It is this issue which I am considering here. The Act essentially sets out that the complainants had six years from which the cause of action accrued, to make the claim. As a general rule, creditors can reasonably reject Section 75 claims that they are first informed about after the claim has become time-barred under the LA as it wouldn’t be fair to expect creditors to look into such claims so long after the liability arose and after a limitation defence would be available in court. So, it is relevant to consider whether Mrs A and Ms M’s Section 75 claim for misrepresentation was time-barred under the LA before they put it to the Lender. I think it was. A claim for misrepresentation against the Supplier would ordinarily be made under Section 2(1) of the Misrepresentation Act 1967. The limitation period to make such a claim expires

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six years from the date on which the cause of action accrued (see Section 2 of the LA). A claim, like the one in question here, under Section 75 is also ‘an action to recover any sum by virtue of any enactment’ under Section 9 of the LA. The limitation period under that provision is also six years from the date on which the cause of action accrued. The date on which the cause of action accrued in this case was 9 March 2016, when these consumers entered into the purchase and the time of the alleged misrepresentations of the Supplier – which they say were relied upon. As the loan from the Lender was used to help finance the purchase, this was when they entered into the Credit Agreement that Mrs A and Ms M suffered an alleged loss. They first notified the Lender of this Section 75 claim on 1 June 2023. 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 to reject it given what I’ve explained above. In this case, I haven’t seen any other arguments from Mrs A and Ms M to persuade me otherwise. Their points of complaint contained within the PR’s letter set out alleged serious issues early on in the contract and would have clearly included being unhappy with the Supplier from the outset on a number of fronts. Having looked very carefully at what they have to say, I think the circumstances as they allege would have caused discovery of any misrepresentation matters within a very short time of the membership being taken out. I am therefore not upholding this aspect of their complaint as I don’t think the Lender acted unfairly in rejecting the claim, invoking the LA. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that 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 Mrs A and Ms 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. The commission arrangements between the Lender and the Supplier at the Time of Sale and the disclosure of those arrangements; 4. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; 5. The inherent probabilities of the sale given its circumstances; and when relevant, any existing unfairness from a related credit agreement. I have then considered the impact of these on the fairness of the credit relationship between Mrs A and Ms M and the Lender. The Supplier’s sales & marketing practices at the Time of Sale

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Mrs A and Ms M’s complaint about the Lender being party to an unfair credit relationship was made for several reasons. The PR says, for instance, that the right checks weren’t carried out before the Lender lent to Mrs A and Ms M. I haven’t seen anything to persuade me this was the case in this complaint given its 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 Mrs A and Ms M was actually unaffordable before also concluding that they lost out as a result and then consider whether the credit relationship with the Lender was unfair for this reason. Mrs A and Ms M did not expand on why or how the lending was unaffordable during the course of their complaint. I can see our investigator also specifically invited their PR to provide a case for why unaffordable lending was an alleged feature here. But it seems to me that very little action was taken to put forward any information or evidence helpful to this cause. Essentially, I think what’s left is the ‘bare bones’ of an allegation and as these complainants are represented by a PR, I would have thought it reasonable that if unaffordable lending was indeed a pillar of this complaint, then it ought to have been laid out clearly. From the very limited information provided, I am not satisfied that the lending was unaffordable at that time. Connected to this is the suggestion by the PR that the Credit Agreement was arranged by an unauthorised credit broker, the upshot of which is to suggest that the Lender wasn’t permitted to enforce the Credit Agreement. Again, there’s no evidence this was the case here. However, it looks to me like these consumers both knew, amongst other things, how much they were borrowing and repaying each month, who they were borrowing from and that they were borrowing money to pay for Fractional membership. As that lending doesn’t look like it was unaffordable, even if the Credit Agreement was arranged by a broker that didn’t have the necessary permission to do so (and I make no finding on this), I can’t see why that led to them suffering a financial loss – such that I can say that the credit relationship in question was unfair as a result. I note that their PR says that oppressive and rushed sales techniques were a feature of the membership purchase in March 2016, and I have considered carefully what is said about this. But while I acknowledge that Mrs A and Ms M may have felt weary after sales processes that went on for a long time, for example, I can’t see why this would have caused them to think they had no choice but to go ahead and buy a timeshare product which they didn’t want. It’s been alleged that there was no cooling off period, but I don’t think that’s right. I’ve noted that Mrs A and Ms M both signed a ‘right of withdrawal’ form which advised of the right to cancel the transaction within a 14-day period, and they have not given any explanation as to why they didn’t do this. Overall, therefore, I don’t think that this credit relationship with the Lender was rendered unfair under Section 140A for any of the reasons above. But there is another reason, perhaps the main reason, why the PR says the credit relationship with the Lender was unfair. And that’s the suggestion that membership was marketed and sold as an investment in breach of the prohibition against selling timeshares in that way. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mrs A and Ms 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 this type of membership as an investment. This is what the provision said at the Time of Sale:

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“A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.” The PR says that the Supplier did exactly this at the Time of Sale – saying, in summary, that Mrs A and Ms 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 decision, and by reference to the decided authorities, an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. A share in the Allocated Property clearly constituted an investment because it offered Mrs A and Ms M 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 Fractional Club. They just regulated how such products were marketed and sold. To conclude, therefore, that membership was marketed or sold to Mrs A and Ms 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 as an investment, i.e. told them or led them to believe that membership offered the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. I am familiar with the documentation and processes used by the Supplier during these types of sale. There is competing evidence in this complaint as to whether the 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 as an ‘investment’ or quantifying to prospective purchasers, such as Mrs A and Ms M, the financial value of the share in the net sales proceeds of the Allocated Property along with the investment considerations, risks and rewards attached. I also acknowledge that the Supplier’s sales process left open the possibility that the sales representative may have positioned membership as an investment. So, I accept that it’s equally possible that Fractional Club membership was marketed and sold to Mrs A and Ms 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. With that being the case, it’s not necessary to make a formal finding on that particular issue for the purposes of this decision. Was the credit relationship between the Lender and the Consumer rendered unfair? Having said that it was possible that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I now need to consider what impact that breach could have had on the fairness of the credit relationship between Mrs A and Ms M and the Lender under the Credit Agreement and related Purchase Agreement as the case law on

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Section 140A makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. Indeed, it seems to me that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mrs A and Ms M and the Lender that was unfair and warranted relief as a result, then whether the Supplier’s breach of Regulation 14(3) led them to enter into the Purchase Agreement and the Credit Agreement is an important consideration. In so far as any allegation of investment related marketing carried out by the Supplier during the sale is concerned, the PR said, “they were told they had purchased an investment which would appreciate in value.” However, there was no further descriptive detail or evidence underpinning these allegations within the Letter of Complaint. I’ve also seen a great many complaints from this PR where this allegation is set out in exactly the same way. I’ve also seen that we’ve been sent a statement which I am told is from the consumers, evidently their opportunity to explain in their own words what happened. However, I am concerned that there is a risk of inaccuracy caused by the timing of the statement: it is dated 24 October 2024, which is some seven years after the original sale, and whilst the original complaint was brought in June 2023. We can also be sure it was written after the influential court judgment on Shawbrook & BPF v FOS1. This case put several important legal and factual findings into the public domain that have since had a significant influence on how complaints about timeshares—especially fractional type ownership models—are brought and assessed. This case brought significant public attention to issues specifically surrounding the alleged marketing and sale of timeshares as investments, which Regulation 14(3) prohibited. Even so, it still seems to me that the statement fails to replicate the allegations made by the PR about the purchase being explicitly made because it was marketed to Mrs A and Ms M as an ‘investment’. I disagree with the PR that this statement adds weight to this type of allegation. I think what the statement outlines more in this respect is mainly a description of how the Fractional membership worked i.e. that at the end of the term these consumers would own a small percentage of the Allocated Property which could be realised upon disposal. Indeed, what Mrs A and Ms M have to say about this should, in my view, be contextualised with the much greater emphasis they give to other alleged aspects of the sale. These include allegations of being pressured into buying the membership and a brief mention of affordability – both issues I have dealt with above. Also, although not mentioned in the Letter of Complaint itself, we know that prior to purchasing this Fractional membership, it seems Ms M had purchased a type of ‘trial’ membership in 2015 with another person (believed to be a then partner). And that partner was later transferred (away) from the trial, and then Mrs A was replaced, allowing Mrs A and Ms M to holiday together in 2016 when they went on to buy the Fractional membership. In my view, I think this speaks to their desire to enjoy future holidays together and to me it does point to some independent thought being given at the point of sale in March 2016, as to what they wanted to do. Put another way, I think these circumstances add weight to Mrs A and Ms M thinking through their purchasing options and deciding to go ahead, so they could holiday together in the future. So overall, I’m afraid I don’t think this complaint and the way which it has been brought provides persuasive testimony that they purchased this timeshare membership for the purposes of it being an investment. I think the wider circumstances point much more towards 1 R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd and R (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin)

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holiday enjoyment and diversity as being Mrs A and Ms M’s primary motivations for making the purchase. Of course, these weren’t unreasonable objectives, but in this particular case they considerably outweigh the allegations that Mrs A and Ms M were motivated to make this purchased based on any investment-related rationale. I do accept that both may look back now at this period with genuine regret, and they may even now wish they hadn’t undertaken this type of purchase at all. But at the time, I think their purchasing motivations lay in obtaining future holidaying enjoyment together. The circumstances just don’t describe Mrs A and Ms M buying the membership with an expectation of it being an unspecified investment which would yield a gain or profit, which in their case was in the 2030s. This doesn’t mean they were not 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 with all this in mind, I think it’s much more likely that Mrs A and Ms M would have just pressed ahead with the purchase whether or not there had been a breach of Regulation 14(3) because that’s what they wanted at the time. On this basis, I don’t think the credit relationship between them and the Lender was unfair. The provision of information by the Supplier at the Time of Sale Mrs A and Ms M say they were not given sufficient information at the time by the Supplier about some of the ongoing costs of the membership. The PR also says that the contractual terms governing the ongoing costs of membership and the consequences of not meeting those costs were unfair contract terms. 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 Mrs A and Ms M sufficient information, in good time, on the various charges they could have been subject to in order to satisfy the requirements of Regulation 12 of the Timeshare Regulations (which was concerned with the provision of ‘key information’). But even if that was the case, I cannot see that the ongoing costs of membership were applied unfairly in practice. As for the PR’s argument that there were one or more unfair contract terms in the Purchase Agreement, I can’t see that any such terms were operated unfairly against Mrs A and Ms M in practice, nor that any such terms led them to behave in a certain way to their detriment. So, with that being the case, I’m not persuaded that any of the terms governing the membership are likely to have led to an unfairness that warrants a remedy. Commission Our investigator told the PR in March 2025 that no commission changed hands between the Lender and the Supplier during this sale. In March 2026 I reiterated that no commission changed hands in a ‘side letter’ to the PR. 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

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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: 1. The size of the commission as a proportion of the charge for credit; 2. The way in which commission is calculated (a discretionary commission arrangement, for example, may lead to higher interest rates); 3. The characteristics of the consumer; 4. The extent of any disclosure and the manner of that disclosure (which, insofar as Section 56 of the CCA is engaged, includes any disclosure by a supplier when acting as a broker); and 5. Compliance with the regulatory rules. From my reading of the Supreme Court’s judgment in Hopcraft, Johnson and Wrench, it sets out principles which apply to credit brokers other than car dealer–credit brokers. So, when considering allegations of undisclosed payments of commission like the one in this complaint, Hopcraft, Johnson and Wrench is relevant law that I’m required to consider under Rule 3.6.4 of the Financial Conduct Authority’s Dispute Resolution Rules (‘DISP’). But I don’t think Hopcraft, Johnson and Wrench assists Mrs A and Ms M arguing that the credit relationship with the Lender was unfair 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 the consumers, 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 Mrs A and Ms M into a credit agreement that cost disproportionately more than it otherwise could have. What’s more, in stark contrast to the facts of Mr Johnson’s case, as I understand it, no payment between the Lender and the Supplier, such as a commission, was payable when the Credit Agreement was arranged at the Time of Sale. With that being the case, even if there were information failings at that time and regulatory failings as a result (which I make no formal finding on), I’m not currently persuaded that the commercial 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.

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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. Overall Conclusion Given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mrs A and Ms M’s Section 75 claim. I also am not persuaded that the Lender was party to a credit relationship under the Credit Agreement and related Purchase Agreement that was unfair for the purposes of Section 140A of the CCA. Having taken everything into account, I see no other reason why it would be fair or reasonable to direct the Lender to compensate them. I’m very sorry to disappoint Mrs A and Ms M. My final decision I do not uphold this complaint. I do not require First Holiday Finance Limited to do anything more. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs A and Ms M to accept or reject my decision before 27 April 2026. Michael Campbell Ombudsman

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