Shawbrook Bank Limited · DRN-6167792

The complaint Mr and Mrs N’s complaint is, in essence, that Shawbrook Bank 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 Mr and Mrs N purchased membership of a timeshare (the ‘Fractional Club’) from a timeshare provider (the ‘Supplier’) on 18 October 2016 (the ‘Time of Sale’). They entered into an agreement with the Supplier to buy 1200 fractional points at a cost of £18,830 (the ‘Purchase Agreement’). Mr and Mrs N traded in an existing trial membership. Fractional Club membership was asset backed – which meant it gave Mr and Mrs N more than just holiday rights. It also included a share in the net sale proceeds of a property named on their Purchase Agreement (the ‘Allocated Property’) after their membership term ends. Mr and Mrs N paid for their Fractional Club membership by taking finance of £18,830 from the Lender. (the ‘Credit Agreement’). The loan was settled on 4 November 2017. Mr and Mrs N – using a professional representative (the ‘PR’) – wrote to the Lender on 15 November 2021 (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 dealt with Mr and Mrs N’s concerns as a complaint and issued its final response letter on 8 November 2022, rejecting it on every ground. Mr and Mrs N then referred the complaint to the Financial Ombudsman Service. It was assessed by an Investigator who, having considered the information on file, upheld the complaint on its merits. The Investigator thought that the Supplier had marketed and sold Fractional Club membership as an investment to Mr and Mrs N at the Time of Sale in breach of Regulation 14(3) of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 (the ‘Timeshare Regulations’). And given the impact of that breach on their purchasing decision, the Investigator concluded that the credit relationship between the Lender and Mr and Mrs N was rendered unfair to them for the purposes of section 140A of the CCA. The Lender 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 (the PD) on 3 February 2026, which explained the reasons why I planned to uphold this complaint. Briefly, I concluded that the Supplier had breached Regulation 14(3) of the Timeshare Regulations by marketing and/or selling Fractional Club membership to Mr and Mrs N as an investment, which, in the circumstances of this complaint, rendered the credit relationship between them and the Lender unfair to them for

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the purposes of Section 140A of the CCA. I said: ‘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, while I recognise that there are a number of aspects to this complaint, it is not necessary to make formal findings on all of them because, even if one or more of those aspects ought to succeed, the redress I am currently proposing puts Mr and Mrs N in the same or a better position than they would otherwise be in. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? Having considered the entirety of the credit relationship between Mr and Mrs N and the Lender along with all of the circumstances of the complaint, I 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 Supplier’s sales and marketing practices at the Time of Sale – which includes training material that I think is likely to be relevant to the sale; 2. The provision of information by the Supplier at the Time of Sale, including the contractual documentation and disclaimers made by the Supplier; 3. Evidence provided by both parties on what was likely to have been said and/or done at the Time of Sale; and 4. The inherent probabilities of the sale given its circumstances. I have then considered the impact of these on the fairness of the credit relationship between Mr and Mrs N and the Lender. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mr and Mrs N’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 Mr and Mrs N say that the Supplier did exactly that at the Time of Sale. Their witness statement, of February 2021, spans more than one sale. Necessarily, I have only considered their comments in relation to this sale when considering this particular complaint. They say the Supplier told them that: ‘This was an investment that could be passed onto our children and that at the end of 19 years, the property will be sold and we will get our investment back with profit…When we said that we are into the property business in the UK and that we are both interested in buying a property, (they were marketing some properties in the USA at the time) rather than fractions, we were told that we could use our fractional investment as a deposit for one of the properties.’ It seems to me then Mr and Mrs N allege, therefore, that the Supplier breached Regulation 14(3) at the Time of Sale because they were told by the Supplier that they would get their money back (and more) during the sale of Fractional Club membership.

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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. Mr and Mrs N’s share in the Allocated Property clearly constituted an investment as it offered them 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 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. 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 and Mrs N 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 Mr and Mrs N or led them to believe that Fractional Club membership offered them the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. There is evidence in this complaint 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 and Mrs N, 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. There were, for instance, disclaimers in the contemporaneous paperwork that state that Fractional Club membership was not sold to Mr and Mrs N as an investment. However, weighing up what happened in practice is, in my view, rarely as simple as looking at the contemporaneous paperwork. And for reasons I’ll now come on to, given the facts and circumstances of this complaint, I think the Supplier is likely to have breached Regulation 14(3) of the Timeshare Regulations. How the Supplier marketed and sold the Fractional Club membership During the course of the Financial Ombudsman Service’s work on complaints about the sale of timeshares, the Supplier has provided training material used to prepare its sales representatives – including: 1. a document called the 2013/2014 Sales Induction Training (the ‘2013/2014 Induction Training’); 2. screenshots of a Electronic Sales Aid (the ‘ESA’); and 3. a document called the “FPOC2 Fly Buy Induction Training Manual” (the ‘Fractional Club Training Manual’) Neither the 2013/2014 Induction Training nor the ESA I’ve seen included notes of any kind. However, the Fractional Club Training Manual includes very similar slides to those used in the ESA. And according to the Supplier, the Fractional Club Training Manual (or something similar) was used by it to train its sales representatives at the Time of Sale. So, it seems to me that the Training Manual is reasonably indicative of:

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(1) the training the Supplier’s sales representatives would have got before selling Fractional Club membership; and (2) how the sales representatives would have framed the Supplier’s multimedia presentation (i.e., the ESA) during the sale of Fractional Club membership to prospective members – including Mr and Mrs N. The “Game Plan” on page 23 of the Fractional Club Training Manual indicates that, of the first 12 to 25 minutes, most of that time would have been spent taking prospective members through a comparison between “renting” and “owning” along with how membership of the Fractional Club worked and what it was intended to achieve. Page 32 of the Fractional Club Training Manual covered how the Supplier’s sales representatives should address that comparison in more detail – indicating that they would have tried to demonstrate that there were financial advantages to owning property, over 10 years for example, rather than renting: Indeed, one of the advantages of ownership referred to in the slide above is that it makes more financial sense than renting because owners “are building equity in their property”. And as an owner’s equity in their property is built over time as the value of the asset increases relative to the size of the mortgage secured against it, one of the advantages of ownership over renting was portrayed in terms that played on the opportunity ownership gave prospective members of the Fractional Club to accumulate wealth over time. I acknowledge that the slides don’t include express reference to the “investment” benefit of ownership. But the description alludes to much the same concept. It was simply rephrased in the language of “building equity”. And with that being the case, it seems to me that the

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approach to marketing FCM was to strongly imply that ‘owning’ fractional points was a way of building wealth over time, similar to home ownership. Page 33 of the Fractional Club Training Manual then moved the Supplier’s sales representatives onto a cost comparison between “renting” holidays and “owning” them. Sales representatives were told to ask prospective members to tell them what they’d own if they just paid for holidays every year in contrast to spending the same amount of money to “own” their holidays – thus laying the groundwork necessary to demonstrating the advantages of Fractional Club membership: With the groundwork laid, sales representatives were then taken to the part of the ESA that explained how FCM worked. And, on pages 41 and 42 of the Fractional Club Training Manual, this is what sales representatives were told to say to prospective members when explaining what a ‘fraction’ was: “FPOC = small piece of […] World apartment which equals ownership of bricks and mortar […] Major benefit is the property is sold in nineteen years (optimum period to cover peaks and troughs in the market) when sold you will get your share of the proceeds of the sale

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SUMMARISE LAST SLIDE: FPOC equals a passport to fantastic holidays for 19 years with a return at the end of that period. When was the last time you went on holiday and got some money back? How would you feel if there was an opportunity of doing that? […] LINK: Many people join us every day and one of the main questions they have is “how can we be sure our interests are taken care of for the full 19 years? As it is very important you understand how we ensure that, I am going to ask Paul to come over and explain this in more details for you. […] “Handover: (Manager’s name) John and Mary love FPOC and have told me the best for them is…………………………..Would you mind explaining to them how their interest will be protected over the next 19 year[s]?” (My emphasis added) The Fractional Club Training Manual doesn’t give any immediate context to what the manager would have said to prospective members in answer to the question posed by the sales representative at the handover. Page 43 of the manual has the word “script” on it but otherwise it’s blank. However, after the Manual covered areas like the types of holiday and accommodation on offer to members, it went onto “resort management”, at which point page 61 said this: “T/O will explain slides emphasising that they only pay a fraction of maintaining the entire property. It also ensures property is kept in peak condition to maximise the return in 19 years[’] time. […] CLOSE: I am sure you will agree with us that this management fee is an extremely important part of the equation as it ensures the property is maintained in pristine condition so at the end of the 19 year period, when the property is sold, you can get the maximum return. So I take it, like our owners, there is nothing about the management fee that would stop you taking you holidays with us in the future?...” (My emphasis added) By page 68 of the Fractional Training Manual, sales representatives were moved on to the holiday budget of prospective members. Included in the ESA were a number of holiday comparisons. It isn’t entirely clear to me what the relevant parts of the ESA were designed to show prospective members. But it seems that prospective members would have been shown that there was the prospect of a “return”. For example, on page 69 of the Fractional Club Induction Training Manual, it included the following screenshots of the ESA along with the context the Supplier’s sales representatives were told to give to them:

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[…] “We also agreed that you would get nothing back from the travel agent at the end of this holiday period. Remember with your fraction at the end of the 19 year period, you will get some money back from the sale, so even if you only got a small part of your initial outlay, say £5,000 it would still be more than you would get renting your holidays from a travel agent, wouldn’t it?” I acknowledge that the slides above set out a “return” that is less than the total cost of the holidays and the “initial outlay”. But that was just an example and, given the way in which it was positioned in the Training Manual, the language did leave open the possibility that the

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return could be equal to if not more than the initial outlay. Furthermore, the slides above represent FCM as: (1) The right to receive holiday rights for 19 years whose market value significantly exceeds the costs to a Fractional Club member; plus (2) A significant financial return at the end of the membership term. And to consumers (like Mr and Mrs N) who were looking to buy holidays anyway, the comparison the slides make between the costs of FCM and the higher cost of buying holidays on the open market was likely to have suggested to them that the financial return was in fact an overall profit. I acknowledge that there may not have been a comparison between the expected level of financial return and the purchase price of Fractional Club membership. However, if I were to only concern myself with express efforts to quantify to Mr and Mrs N the financial value of the proprietary interest they were offered, I think that would involve taking too narrow a view of the prohibition against marketing and selling timeshares as an investment in Regulation 14(3). When the Government consulted on the implementation of the Timeshare Regulations, it discussed what marketing or selling a timeshare as an investment might look like – saying that ‘[a] trader must not market or sell a timeshare or [long-term] holiday product as an investment. For example, there should not be any inference that the cost of the contract would be recoupable at a profit in the future (see regulation 14(3)).”1 And in my view that must have been correct because it would defeat the consumer-protection purpose of Regulation 14(3) if the concepts of marketing and selling a timeshare as an investment were interpreted too restrictively. So, if a supplier implied to consumers that future financial returns (in the sense of possible profits) from a timeshare were a good reason to purchase it, I think its conduct was likely to have fallen foul of the prohibition against marketing or selling the product as an investment. Given what I’ve already said about the Supplier’s training material and the way in which I think it was likely to have framed the sale of Fractional membership to prospective members (including Mr and Mrs N) I think it is more likely than not that the Supplier did, at the very least, imply that future financial returns (in the sense of possible profits) from a Fractional Membership were a good reason to purchase it – which, broadly speaking, is consistent with Mr and Mrs N’s recollections of the sale. So, overall, on the balance of probabilities, I think the Supplier’s sales representative was likely to have led Mr and Mrs N to believe that Fractional membership was an investment that may lead to a financial gain (i.e., a profit) in the future. And with that being the case, I do not find them either implausible or hard to believe when they say that they were told that they were buying shares in property that, being an investment, may well lead to a financial gain when it was sold. On the contrary, given everything I have seen so far, I think that is likely to be what Mr and Mrs N were led to believe by the Supplier at the relevant time. Further, it seems to me that Mr and Mrs N’s evidence that they were buying membership as something that they could ultimately use as a deposit to purchase a property fitted with the concept of building equity in a product, as set out above. And for that reason, I think the Supplier breached Regulation 14(3) of the Timeshare Regulations. 1 The Department for Business Innovation & Skills “Consultation on Implementation of EU Directive 2008/122/EC on Timeshare, Long-Term Holiday Products, Resale and Exchange Contracts (July 2010)”. https://assets.publishing.service.gov.uk/media/5a78d54ded915d0422065b2a/10-500-consultation-directive-timeshare- holiday.pdf

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Was the credit relationship between the Lender and the Consumer rendered unfair? Having found 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 and Mrs N 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 that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mr and Mrs N and the Lender that was unfair to them and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led Mr and Mrs N to enter into the Purchase Agreement and the Credit Agreement is an important consideration. Mr and Mrs N have explained their previous relationship with the Supplier – the purchase of a trial membership of the ‘Destinations Club’. This type of membership differed from Fractional Club as it was not associated with the sale proceeds of a property and offered a set number of holidays over a three year period so Mr and Mrs N the opportunity to try out the Supplier’s resorts.. Turning to what happened at the Time of Sale, Mr and Mrs N have referred to the incentives the Supplier offered them to induce them into taking out Fractional Club membership and that this might have had a bearing on their decision to purchase membership. I think Mr and Mrs N have set out in a clear and plausible way about how what they say they were told about Fractional Membership strongly influenced their decision to purchase it. As I’ve said, Mr and Mrs N told us they were already involved with the property business in the UK at the time of sale and they were more interested in purchasing overseas property than buying a share of the Allocated Property. They’ve clearly stated that they were told they could use the Fractional Club membership as a deposit on an overseas property, something that was also specifically referred to in the written information from the Time of Sale. They added that they decided to go ahead with the sale, taking out a 12 month interest-free credit agreement, so they could pay off the loan and then go on to purchase a property in the USA. I think this is highly suggestive that the potential to benefit from investment gains to expand their property portfolio was a motivating factor for Mr and Mrs N. I also find their evidence plausible as they go on to talk about a second purchase of a similar timeshare where they did not make the same allegations that it has been presented to them as an investment. So it seems that they have carefully thought about each of the sales and given their honest recollections as best they could. So, in my view, Mr and Mrs N have provided persuasive testimony which makes me think it’s most likely that the possibility of obtaining a profit motivated Mr and Mrs N to take out Fractional Membership. And I’ve borne in mind that Mr and Mrs N also say they were influenced by the prospect of the investment being passed on to their children. Again, given what Mr and Mrs N have said about being involved in the property business and their investment plans, this too seems sufficiently persuasive evidence that a breach of Regulation 14(3) did lead Mr and Mrs N to enter into the Purchase Agreement and Credit Agreement, as a means of building up a financial legacy.

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Therefore, on my reading of Mr and Mrs N’s testimony, the prospect of a financial gain from Fractional Club membership was an important and motivating factor when they decided to go ahead with their purchase. That doesn’t mean they were not interested in holidays. Their own testimony demonstrates that they quite clearly were. And that is not surprising given the nature of the product at the centre of this complaint. But as Mr and Mrs N say (plausibly in my view) that Fractional Club membership was marketed and sold to them at the Time of Sale as something that offered them more than just holiday rights, on the balance of probabilities, I think their purchase was motivated by their share in the Allocated Property and the possibility of a profit as that share was one of the defining features of membership that marked it apart from their existing membership. And with that being the case, I think the Supplier’s breach of Regulation 14(3) was material to the decision Mr and Mrs N ultimately made. Mr and Mrs N have not said or suggested, for example, that they would have pressed ahead with the purchase in question had the Supplier not led them to believe that Fractional Club membership was an appealing investment opportunity. And as they faced the prospect of borrowing and repaying a substantial sum of money while subjecting themselves to a significant financial commitments, had they not been encouraged by the prospect of a financial gain from membership of the Fractional Club, I’m not persuaded that Mr and Mrs N would have pressed ahead with their purchase regardless. Conclusion Given the facts and circumstances of this complaint, I think the Lender participated in and perpetuated an unfair credit relationship with Mr and Mrs N under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A. And with that being the case, taking everything into account, I think it is fair and reasonable that I uphold this complaint. Fair compensation Having found that Mr and Mrs N would not have agreed to purchase Fractional Club membership at the Time of Sale were it not for the breach of Regulation 14(3) of the Timeshare Regulations by the Supplier (as deemed agent for the Lender), and the impact of that breach meaning that, in my view, the relationship between the Lender and the Consumer was unfair under section 140A of the CCA, I think it would be fair and reasonable to put them back in the position they would have been in had they not purchased the Fractional Club membership (i.e., not entered into the Purchase Agreement), and therefore not entered into the Credit Agreement, Mr and Mrs N agree to assign to the Lender their Fractional Points or hold them on trust for the Lender if that can be achieved. Mr and Mrs N were trial members before purchasing Fractional Club membership. As I understand it, trial membership involved the purchase of a fixed number of week-long holidays that could be taken with the Supplier over a set period in return for a fixed price. The purpose of trial membership was to give prospective members of the Supplier’s longer- term products a short-term experience of what it would be like to be a member of, for example, the Fractional Club. According to an extract from the Supplier’s business plan, roughly half of trial members went on to become timeshare members.

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If, after purchasing trial membership, a consumer went on to purchase membership of one of the Supplier’s longer-term products, their trial membership was usually cancelled and traded in against the purchase price of their timeshare – which was what happened at the Time of Sale. Mr and Mrs N’s trial membership was, therefore, a precursor to their Fractional Club membership. With that being the case, the trade-in value acted, in essence, as a deposit on this occasion and I think this ought to be reflected in my redress when remedying the unfairness I have found. On 11 July 2017, (the ‘Time of Upgrade’), Mr and Mrs N upgraded Fractional Club membership by trading in their existing Fractional Points for a new membership (‘Signature Collection), paying an additional £14,048 and entering into a new purchase agreement for a total of 1540 Fractional Points. Formally, the new purchase agreement superseded the old one, but in my view, it really just supplemented Mr and Mrs N’s Fractional Club membership, rolling over their existing Fractional Points into Signature Collection membership. And I don’t think the upgrade ended the unfairness under the Credit Agreement and related Purchase Agreement that stemmed from the acts and/or omissions of the Suppler at the Time of Sale given the facts and circumstances of this complaint. So, I think that there were ongoing effects of unfairness from Mr and Mrs N’s purchase of Fractional Club Membership and the Credit Agreement that the Lender is answerable for. However, I recognise that the upgrade in question was paid for by an entirely new loan with the Lender, which did not refinance the loan at the centre of this complaint. And for that reason, I’m not persuaded the Lender should have to answer for the financial consequences specifically associated with the 340 additional Fractional Points Mr and Mrs N purchased on 11 July 2017. So, in my view, the Lender needs to refund a proportion of the management charges payable after the Time of Upgrade that relates to the 1200 of Fractional Points Mr and Mrs N held under Fractional Club membership – which, on this occasion, equates to 78% of the annual management charges paid after the Time of Upgrade under Signature Collection membership. So, given all of the above, here’s what I think needs to be done to compensate Mr and Mrs N – whether or not a court would award such compensation: (1) The Lender should refund Mr and Mrs N’s repayments to it under the Credit Agreement, including any sums paid to settle the debt, and cancel any outstanding balance if there is one. (2) In addition to (1), the Lender should also refund:

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i. The annual management charges Mr and Mrs N paid as a result of Fractional Club membership before the Time of Upgrade ii. The difference between 78% of the Signature Collection annual management charges they paid after the Time of Upgrade and the annual management charges they would have paid under Fractional Club membership had they not purchased Signature Collection membership. iii. The trade-in value given to Mr and Mrs N’s trial membership. (3) The Lender can deduct: i. The value of any promotional giveaways that Mr and Mrs N used or took advantage of; and ii. Before the Time of Upgrade, the market value of the holidays* Mr and Mrs took using their Fractional Points. iii. After the Time of Upgrade, the market value of the holidays* Mr and Mrs N took using Signature Collection membership if the Points value of the holiday(s) taken amounted to more than the total number of Fractional Points they would have been entitled to use at the time of the holiday(s) as ongoing Fractional Club members. However, this deduction should relate only to 78% of the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs N took a holiday worth 2,550 Fractional Points after the Time of Upgrade and they would have been entitled to use a total of 2,500 Fractional Points under Fractional Club membership at the relevant time, any deduction for the market value of that holiday should relate only to 78% of the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 Fractional Points under Fractional Club membership, for instance, there shouldn’t be a deduction for the market value of the relevant holiday. (I’ll refer to the output of steps 1 to 3 as the ‘Net Repayments’ hereafter) (4) Simple interest** at 8% per annum should be added to each of the Net Repayments from the date each one was made until the date the Lender settles this complaint. (5) The Lender should remove any adverse information recorded on Mr and Mrs N’s credit file(s) in connection with the Credit Agreement reported within six years of this decision. (6) If Mr and Mrs N’s Signature Collection membership is still in place at the time of this decision, the Lender must ask the Supplier to reduce the number of Fractional Points they hold by 1200 Fractional Points. If the Supplier agrees to do that, then Mr and Mrs N must agree to hold the remaining Fractional Points for the benefit of the Lender (or assign them to the Lender if that can be achieved. What’s more, the Lender must indemnify Mr and Mrs N against 78% of all ongoing liabilities as a result of Fractional Club membership. However, if in response to this provisional decision the Supplier doesn’t agree to reduce the number of Fractional Points Mr and Mrs N hold, the Lender must let me know so that I can consider the most appropriate remedy with that being the case.’ I asked both parties to send me any additional evidence or comments they wanted me to consider. The PR confirmed that Mr and Mrs N accepted my provisional findings.

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The Lender said it did not intend to challenge my provisional decision to uphold Mr and Mrs N’s complaint – but that it did not agree with the redress methodology I’d proposed in the PD. I’ve summarised its further submission below: • While I had correctly concluded that the 2017 purchase agreement had superseded the 2016 agreement, it did not agree with my analysis that it had supplemented Mr and Mrs N’s Fractional Club membership or rolled up their existing points into Signature Collection membership; • Instead, the purchase of Signature Collection membership was a new and distinct sales event. Therefore, the relationship under the Fractional Club membership would have ended at that time. The trial membership too was a distinct, standalone product; • It was irrational for me to cite arguments from the Supplier’s business plan, alongside the references to roughly half of trial members going on to become full members, as the basis for asserting that the trial membership was pre-cursor to taking out full membership. On the contrary, it followed that roughly half of its members did not become full members of the Supplier’s other long term products; • To infer that the trade-in value of the trial membership acted as a deposit, with it liable to refund that amount if Fractional membership is subsequently purchased is flawed. That’s because if Mr and Mrs N hadn’t purchased any other long-term membership, their trial membership would have continued. Therefore, it wasn’t part of the same transaction chain; • The trial membership gave Mr and Mrs N a distinct holiday entitlement and there’s nothing to suggest they had any concerns about the sale of the trial membership. The Supplier has confirmed the trial membership can be reinstated, so Mr and Mrs N can be put in the position they would have been in if the Signature Collection hadn’t been sold; • Therefore, it didn’t agree that it should be liable to refund any proportion of the management fees after the Signature Collection purchase in July 2017 or refund any trade-in value given to the trial membership; • It also added some observations about the more general approach taken by our Service and the relevant legal position in regard to complaints like these to consider in the assessment of future complaints. 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. 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 so and having carefully considered the Lender’s further submissions, my final decision is the same as my provisional decision and for the same reasons. As I explained in my PD though, 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

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either party has said, this doesn’t mean I haven’t considered it. Instead I have focused on what I believe to be the key issues. The Lender agreed with my overall decision to uphold Mr and Mrs N’s complaint. Therefore, while I would reassure it that I have fully reviewed the observations it set out regarding our general approach to cases such as this, I do not think I need to make any formal finding on them here. That’s because my key finding would remain unchanged – that on the facts of this complaint, any breach of Regulation 14(3) by the Supplier was ultimately material to Mr and Mrs N’s decision to purchase Fractional Membership. And therefore, I still find the Lender participated in and perpetuated an unfair credit relationship with Mr and Mrs N under the Credit Agreement and related Purchase Agreement for the purposes of Section 140A. So, it seems to me that the sole issue which remains for me to decide is what fair compensation should be to reflect the financial loss Mr and Mrs N suffered as a result of that unfair credit relationship. The Lender has explained why it doesn’t think it should have to refund the trade-in value of the trial membership. It’s keen to stress that the trial membership was a standalone product with its own holiday entitlement, that half of those who purchased a trial membership didn’t go on to purchase a full membership of some sort, and that the trial membership can be reinstated. Where a court has determined that a relationship is unfair under section 140A, it has ‘the broadest possible remedial discretion in deciding what order, if any, to make under section 140B’, according to the Supreme Court in Smith v Royal Bank of Scotland [2023] UKSC 34 (‘Smith’). In Smith, Lord Leggatt said: ‘It is, I think, clear that the court is not in these circumstances required to engage in the kind of strict analysis of causation, loss and so forth that would be required, for example, in deciding what remedy to award in a claim founded in the law of contract or tort. … In principle, the purpose must be to remove the cause(s) of the unfairness which the court has identified, if they are still continuing, and to reverse any damaging financial consequences to the debtor of that unfairness…’ I’d reiterate that the redress I propose may differ from the award a court might make – under the rules I must apply, I’m required to determine this complaint and award any compensation based on what I think is fair and reasonable in all the circumstances of the complaint. That said, I’m mindful of Smith all the same. In the Lender’s words, the trial membership was ‘specifically designed to give non-members an insight into holiday opportunities available with [the Supplier]’. To direct that it should be reinstated when Mr and Mrs N have had ample opportunity to explore those ‘opportunities’, have made two purchases, and I’ve determined that one of them was essentially mis-sold, would, I think, be perverse and certainly unfair. Here, Mr and Mrs N didn’t use their trial membership before they decided to purchase a full membership – and the Supplier has recognised this by deducting the full value of the trial membership from the cash price of the Fractional Club membership. In the circumstances, I (still) think it’s fair and reasonable to treat it as a deposit of sorts, and to direct the Lender to refund the trade-in value of the trial membership accordingly. The Lender has also explained why it doesn’t think it should have to refund any portion of the management fees paid after the Signature Collection purchase in July 2017. Essentially,

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it relies on the fact that they’re separate contracts to argue that the relationship under the Fractional Club membership – and any unfairness – ended at this point. With Smith in mind, it’s necessary to consider if there are any on-going effects of unfairness even if, technically, the relationship has ended. I don’t think the ‘upgrade’ ended the unfairness and the remedy needs to reflect that. And I’m satisfied that the remedy I’ve proposed is fair and proportionate. Putting things right I now direct the Lender to do the following; (1) The Lender must refund Mr and Mrs N’s repayments to it under the Credit Agreement, including any sums paid to settle the debt, and cancel any outstanding balance if there is one. (2) In addition to (1), the Lender must also refund: i. The annual management charges Mr and Mrs N paid as a result of Fractional Club membership before the Time of Upgrade ii. The difference between 78% of the Signature Collection annual management charges they paid after the Time of Upgrade and the annual management charges they would have paid under Fractional Club membership had they not purchased Signature Collection membership. iii. The trade-in value given to Mr and Mrs N’s trial membership. (3) The Lender can deduct: i) The value of any promotional giveaways that Mr and Mrs N used or took advantage of; and ii) Before the Time of Upgrade, the market value of the holidays* Mr and Mrs took using their Fractional Points. iii) After the Time of Upgrade, the market value of the holidays* Mr and Mrs N took using Signature Collection membership if the Points value of the holiday(s) taken amounted to more than the total number of Fractional Points they would have been entitled to use at the time of the holiday(s) as ongoing Fractional Club members. However, this deduction should relate only to 78% of the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs N took a holiday worth 2,550 Fractional Points after the Time of Upgrade and they would have been entitled to use a total of 2,500 Fractional Points under Fractional Club membership at the relevant time, any deduction for the market value of that holiday should relate only to 78% of the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 Fractional Points under Fractional Club membership, for instance, there shouldn’t be a deduction for the market value of the relevant holiday. (I’ll refer to the output of steps 1 to 3 as the ‘Net Repayments’ hereafter) (4) Simple interest** at 8% per annum should be added to each of the Net Repayments from the date each one was made until the date the Lender settles this complaint.

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(5) The Lender should remove any adverse information recorded on Mr and Mrs N’s credit file(s) in connection with the Credit Agreement reported within six years of this decision. (6) If Mr and Mrs N’s Signature Collection membership is still in place at the time of this decision, the Lender must ask the Supplier to reduce the number of Fractional Points they hold by 1200 Fractional Points. If the Supplier agrees to do that, then Mr and Mrs N must agree to hold the remaining Fractional Points for the benefit of the Lender (or assign them to the Lender if that can be achieved. What’s more, the Lender must indemnify Mr and Mrs N against 78% of all ongoing liabilities as a result of Fractional Club membership. My final decision For the reasons I’ve given above and in my provisional decision, my final decision is that I uphold this complaint and direct Shawbrook Bank Limited to put things right as I’ve outlined above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs N to accept or reject my decision before 27 April 2026. Lisa Barham Ombudsman

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