Shawbrook Bank Limited · DRN-6261965

The Complaint Mr and Mrs W’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 W were members of a timeshare provider (the ‘Supplier’) – having purchased a number of products from it over time, including the purchase of 11,000 European Collection points. As European Collection members, every year they could use their points in exchange for holidays at the Supplier’s holiday resorts. Different accommodation had different points values, depending on factors such as location, size, and time of year. In March 2013, Mr and Mrs W converted 7,000 of their European Collection points into 7,000 fractional points. This was their first purchase of this type of points, and they paid £4,284 for this conversion, which they paid for by card. Fractional points differed from their European Collection points. The two significant differences were that fractional points membership had a shorter membership term, and they were also asset backed – which meant the fractional membership gave Mr and Mrs W more than just holiday rights. It also included a share in the net sale proceeds of a property named on their purchase agreement after their membership term ends. On 11 March 2014 (the ‘Time of Sale’), Mr and Mrs W converted their remaining 4,000 European Collection points and entered into a Fractional Club membership agreement for 5,000 fractional points, paying £4,300 to do so (the ‘’Purchase Agreement’). Mr and Mrs W paid for their Fractional Club membership by taking finance of £4,300 from the Lender in their joint names (the ‘Credit Agreement’). It is the purchase of the Fractional Club, and the associated Credit Agreement that is the subject of this complaint. Like their existing fractional points, this also gave Mr and Mrs W more than just holiday rights. The Fractional Club 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. In November 2014, Mr and Mrs W purchased a further 5,000 European Collection points and a one-off VIP experience They also purchased a Silver Sampler membership in September 2016. Both of these purchases were paid for by card. Mr and Mrs W – using a professional representative (the ‘PR’) – wrote to the Lender on 8 June 2022 (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.

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The Lender dealt with Mr and Mrs W’s concerns as a complaint and issued its final response letter on 17 September 2022, rejecting it on every ground. Mr and Mrs W 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 [Consumer] 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 W 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. The provisional decision Having considered everything on file, I thought Mr and Mrs W’s complaint ought to be upheld. I set out my initial thoughts in a provisional decision (the ‘PD’) and invited both sides to submit any new evidence or arguments that they wanted me to consider. In the PD I said: “I have considered all the available evidence and arguments to decide what is fair and reasonable in the circumstances of this complaint. And having done that, I currently think that this complaint should be upheld because the Supplier breached Regulation 14(3) of the Timeshare Regulations by marketing and/or selling Fractional Club membership to Mr and Mrs W as an investment, which, in the circumstances of this complaint, rendered the credit relationship between them and the Lender unfair to them for the purposes of Section 140A of the CCA. 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, 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 W in the same or a better position than they would otherwise be in. Mr and Mrs W’s testimony As part of Mr and Mrs W’s submissions to this service, the PR has submitted a statement. Although dated 16 August 2019, the PR has said this was a typo and have provided a screenshot to evidence that the witness statement was taken on 16 August 2018 so I’m satisfied it was taken in August 2018, as the PR says. As far as relevant to this complaint, they said: “In 2014 we were in Tenerife when the representatives invited us to a meeting. We were taken away for breakfast and the meeting was so long that we also were taken for lunch. We were seeing a pattern of sales technique by the representatives who would attempt to ‘get to know us’ and what would be ‘best for us’ for our holidays. Once they knew what kind of holidays, we wanted then they could offer us ‘a great deal only available that day’. If we said, we did not want any further ‘deals’ the Sales Manager would be brought in. On this occasion the Sales Manager informed us ‘you got this great deal on your last points, but it has not been signed off, so you can still get the points at the cost from your

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last purchase’. This is clearly a lie and happened on more than one occasion. However, on this occasion the representatives offered us additional fractional points which, according to the representatives would offer us our money back plus a greater return on our investment when we decided to sell.” The statement was probably prepared as part of the PR’s case preparation. Indeed, the Letter of Complaint is generally consistent with the contents of the statement, which leads me to think that the statement was used to inform the Letter of Complaint. But the statement appears to have been prepared and written by the PR, and was probably taken during a telephone call with Mr and Mrs W. So, I am mindful of the risk that Mr and Mrs W may have been guided through the process, and the associated risk that what has been written may not be their own specific recollections. But I think that risk is low, as I can see it contains detailed personal information about their purchasing history and what happened at the Time of Sale that only Mr and Mrs W would have known, so I have no doubt that Mr and Mrs W had a significant input into its contents. It is also not unusual for statements to be prepared on complainants’ behalf by professional representatives. Taking everything into account I am satisfied that it is a record of Mr and Mrs W’s recollections of the Time of Sale. When considering how much weight I can place on Mr and Mrs W’s statement, I am assisted by the judgement in the case of Smith v Secretary of State for Transport [2020] EWHC 1954 (QB). At paragraph 40 of the judgment, Mrs Justice Thornton helpfully summarised the case law on how a court should approach the assessment of oral evidence. Although in this case I have not heard direct oral evidence, I think this does set out a useful way to look at the evidence Mr S has provided. Paragraph 40 reads as follows: “At the start of the hearing, I raised with Counsel the issue of how the Court should assess his oral evidence in light of his communication difficulties. Overnight, Counsel agreed a helpful note setting out relevant case law, in particular the commercial case of Gestmin SPGS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) (Leggatt J as he then was at paragraphs 16-22) placed in context by the Court of Appeal in Kogan v Martin [2019] EWCA Civ 1645 (per Floyd LJ at paragraphs 88-89). In the context of language difficulties, Counsel pointed me to the observations of Stuart- Smith J in Arroyo v Equion Energia Ltd (formerly BP Exploration Co (Colombia) Ltd) [2016] EWHC 1699 (TCC) (paragraphs 250-251). Counsel were agreed that I should approach Mr Smith's evidence with the following in mind: a. In assessing oral evidence based on recollection of events which occurred many years ago, the Court must be alive to the unreliability of human memory. Research has shown that memories are fluid and malleable, being constantly rewritten whenever she are retrieved. The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts (Gestin and Kogan). b. A proper awareness of the fallibility of memory does not relieve judges of the task of

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making findings of fact based upon all the evidence. Heuristics or mental short cuts are no substitute for this essential judicial function. In particular, where a party's sworn evidence is disbelieved, the court must say why that is; it cannot simply ignore the evidence (Kogan). c. The task of the Court is always to go on looking for a kernel of truth even if a witness is in some respects unreliable (Arroyo). d. Exaggeration or even fabrication of parts of a witness' testimony does not exclude the possibility that there is a hard core of acceptable evidence within the body of the testimony (Arroyo). e. The mere fact that there are inconsistencies or unreliability in parts of a witness' evidence is normal in the Court's experience, which must be taken into account when assessing the evidence as a whole and whether some parts can be accepted as reliable (Arroyo). f. Wading through a mass of evidence, much of it usually uncorroborated and often coming from witnesses who, for whatever reasons, may be neither reliable nor even truthful, the difficulty of discerning where the truth actually lies, what findings he can properly make, is often one of almost excruciating difficulty yet it is a task which judges are paid to perform to the best of her ability (Arroyo, citing Re A (a child) [2011] EWCA Civ 12 at para 20).” The question to consider, therefore, is whether there is a core of acceptable evidence from Mr and Mrs W. The Lender has pointed out that Mr and Mrs W have not mentioned a purchase from 2004 and incorrectly stated the number of points they obtained as part of their purchase in 2010. I don’t think this would be a reason to doubt Mr and Mrs W’s whole testimony. In my opinion, they’ve provided their recollections spanning over a number of years starting from 2001, which was over 17 years before it was written, being conscious of the fact that memories fade over time, I am satisfied that I am able to place weight on and rely on what Mr and Mrs W have said. 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 W 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 W and the Lender. The Supplier’s breach of Regulation 14(3) of the Timeshare Regulations The Lender does not dispute, and I am satisfied, that Mr and Mrs W’s Fractional Club membership met the definition of a “timeshare contract” and was a “regulated contract” for

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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 W say that the Supplier did exactly that at the Time of Sale – saying, in summary, that they were told by the Supplier that Fractional Club membership was the type of investment that would provide them with the opportunity to get their money back with a profit. The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this provisional decision, an 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 W’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 W as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to them as an investment, i.e. told them or led them to believe that 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 W, the financial value of their share in the net sales proceeds of the Allocated Property along with the investment considerations, risks and rewards attached to them. There were, for instance, disclaimers in the contemporaneous paperwork that state that Fractional Club membership was not sold to Mr and Mrs W 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 its dealing with complaints of a similar nature, this Service has seen some training material and some internal documents relating to the sale of Fractional Club

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by the Supplier. The Supplier has also provided witness statements from both previous and (at the time) existing employees setting out how its sales staff were trained to sell its products – all of which I have considered. In general, I do think some of these materials indicate that the Supplier was focused on avoiding breaching Regulation 14(3). But other materials, like the presentation slides, implied that the Supplier's brand and other attributes would contribute to enhancing the value of the fractional asset at the end of the membership term. Although I can't be certain of what was shown to Mr and Mrs W during their sales process, or what specifically any sales representative may have said to them, any more than the Supplier or Lender can. But I think from what I've seen, there was the potential for the Fractional Club membership to be sold in a way which meant the Supplier is likely to have breached Regulation 14(3) of the Timeshare Regulations. And I don't think the Supplier would have needed to deviate very far from a simple description of how the product worked in terms of the sale of the fractional asset at the end of the term to have fallen foul of Regulation 14(3). I acknowledge what the witness statements say about the Supplier not referring to Fractional Club membership as an ‘investment’, not making any reference to the value of the Allocated Property and making every effort not to give customers, such as Mr and Mrs W, the impression that they were investing in something that would make them a profit. But, it’s ultimately difficult to explain why it was necessary to include such disclaimers if there wasn’t a very real risk of the Supplier marketing and selling membership as an investment, given the difficulty of articulating the benefit of fractional ownership in a way that distinguishes it from other timeshares from the viewpoint of prospective members, especially when customers, such as Mr and Mrs W who were existing members, made their first fractional purchase but did not increase their holiday rights. So, I think it’s reasonable to assume there was likely some discussions at the Time of Sale as to why they should purchase this different type of membership in particular. In other words, some discussion about why Mr and Mrs W ought to purchase the Fractional Club in the way that they did. 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. For, if I'm wrong about that, I find it difficult to explain why, in paragraphs 77 and 78 followed by 100 of Shawbrook & BPF v FOS, Mrs Justice Collins Rice said the following: "[ ... ] I endorse the observation made by Mr Jaffey KC, Counsel for BPF, that, whatever the position in principle, it is apparently a major challenge in practice for timeshare companies to market fractional ownership timeshares consistently with Reg.14(3). [ ... ] Getting the governance principles and paperwork right may not be quite enough. The problem comes back to the difficulty in articulating the intrinsic benefit of fractional ownership over any other timeshare from an individual consumer

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perspective. [ ... ] If it is not a prospect of getting more back from the ultimate proceeds of sale than the fractional ownership cost in the first place, what exactly is the benefit? [ ... ] What the interim use or value to a consumer is of a prospective share in the proceeds of a postponed sale of a property owned by a timeshare company – one they have no right to stay in meanwhile - is persistently elusive." "[ ... ] although the point is more latent in the first decision than in the second, it is clear that both ombudsmen viewed fractional ownership timeshares - simply by virtue of the interest they confer in the sale proceeds of real property unattached to any right to stay in it, and the prospect they undoubtedly hold out of at least 'something back' - as products which are inherently dangerous for consumers. It is a concern that, however scrupulously a fractional ownership timeshare is marketed otherwise, its offer of a 'bonus' property right and a 'return' of (if not on) cash at the end of a moderate term of years may well taste and feel like an investment to consumers who are putting money, loyalty, hope and desire into their purchase anyway. Any timeshare contract is a promise, or at the very least a prospect, of long-term delight. [ ... ] A timeshare-plus contract suggests a prospect of happiness-plus. And a timeshare plus 'property rights' and 'money back' suggests adding the gold of solidity and lasting value to the silver of transient holiday joy." (emphasis my own)” 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 Club membership to prospective members (including Mr and Mrs W), 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 Club membership was a good reason to purchase it - which, broadly speaking, is consistent with Mr and Mrs W’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 W to believe that Fractional Club 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 was were buying shares in property that, being an investment, will lead to a financial gain. On the contrary, given everything I have seen so far, I think that is likely to be what Mr and Mrs W were led to believe by the Supplier at the relevant time. And for that reason, I think the Supplier breached Regulation 14(3) of the Timeshare Regulations. 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 W 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 W and the Lender that was unfair to him and warranted relief as a result, 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. To help me decide this point, I’ve carefully considered what Mr and Mrs W have said in the course of their complaint about how the membership was sold to them and their motivation for taking it out. On my reading of Mr and Mrs W’s testimony, the prospect of a financial gain from Fractional

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Club membership was an important and motivating factor when they decided to go ahead with their purchase. I do however accept that Mr and Mrs W were interested in holidays but that isn’t surprising given the nature of the product at the centre of this complaint so I’m not surprised to see Mr and Mrs W making use of the holiday benefits given to them as part of his membership. I think it’s important to set out what Mr and Mrs W say they were told when they first purchased their Fractional Club membership. Although I am not considering a complaint about this purchase, I think it is fair for me to consider what Mr and Mrs W say they were told as that is likely to set the tone for their subsequent purchase that is the subject of this complaint – especially as this was the same type of product so I think it’s likely it would have been sold in a very similar way. In their written testimony, Mr and Mrs W say the following about their first Fractional Club membership in March 2013: “Fractional points were an investment in property that required to be sold on a set date however, we could sell the property at any time. Once sold, we would have our investment money back plus a profit from the sale.” This would suggest that Mr and Mrs W purchased their agreement on the belief that they would receive a profit at the end of their membership term. And I think it’s likely they would have maintained that belief when purchasing further Fractional points at the Time of Sale. After all, they did say that “the representatives offered us additional fractional points which, according to the representatives would offer us our money back plus a greater return on our investment when we decided to sell.”. Taking everything into consideration, I think Mr and Mrs W say (plausibly in my view) that Fractional Club membership was marketed and sold to them at the Time of Sale as something that offered him 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 the more ‘standard’ type of timeshare available to them. And with that being the case, I think the Supplier’s breach of Regulation 14(3) was material to the decision they ultimately made. Mr and Mrs W have not said or suggested, for example, that they would have pressed ahead with the purchase in question had the Supplier not led him 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 long- term 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 they 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 W 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.” I then set out what I considered to be a fair and reasonable way for the Lender to calculate and pay fair compensation to Mr and Mrs W. The PR responded on Mr and Mrs W’s behalf, accepting what I had said with nothing further

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to add. The Lender also responded, setting out why it disagreed with my PD and that the complaint ought to be rejected. As both sides have now responded, the complaint has come back to me for further consideration. 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. And having done so, and having considered everything that the Lender has said in response to my PD, I am satisfied that this complaint ought to be upheld, for the same reasons as set out in the PD. I will, however, address the points the Lender made in response, whilst bearing in mind 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. So if I haven’t commented on, or referred to, something that either party has said, this doesn’t mean I haven’t considered it. Rather, I’ve focused here on addressing what I consider to be the key issues in deciding this complaint and explaining the reasons for reaching my final decision. The Lender thought the circumstances of Mr and Mrs W’s purchase suggested they made the purchase for reasons other than the investment element. The Lender mainly had concerns over the reliability of the testimony provided by Mr and Mrs W and the weight I placed upon it. The Lender finds it concerning that I have placed such weight upon the statement given by Mr and Mrs W for a number of reasons. It felt I should bear in mind the significant passage of time and involvement of a Claims Management Company when assessing the reliability of the testimony and how much weight that can be placed on it. In my PD, I accepted that Mr and Mrs W’s testimony seems to have been prepared and written by the PR but that in my opinion isn’t a reason to discount the testimony been provided. I’m of the opinion that the statement is a record of Mr and Mrs W’s recollections at the Time of Sale so it’s only fair for me to consider and rely on the contents within in. In the PD I also considered the inconsistencies that the statement contained, and considered whether these meant I couldn’t place the required weight on what it said. But for the reasons I gave, I didn’t think these errors undermined the crux of the statement. In their statement, Mr and Mrs W describe what they were told by the sales representatives in relation to their purchase in 2013. “Fractional points were an investment in property that required to be sold on a set date however, we could sell the property any time. Once sold, we would have our

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investment money back plus a profit from the sale. We were advised that the value of the property as it stood was £30,000 but at the time of sale we would make more.” Although not the subject of my decision, the Lender says their assertions cannot be correct which is something they say I’ve not considered. As I said in my PD, I felt the assertions made by Mr and Mrs W in relation to their 2013 suggested that they purchased their initial Fractional Club membership on the belief that they would receive a profit. And I didn’t think It was unlikely that they maintained that belief when purchasing further points at the Time of Sale. I’m not considering a complaint about their initial purchase, so it would be remiss of me to divulge into the way this was sold. Having reconsidered everything again, I remain satisfied that it is safe to place weight on Mr and Mrs W’s testimony when considering what most likely happened at the Time of Sale The Lender also thought that the PD had dismissed the disclaimers contained in the contractual paperwork with no proper basis or explanation, despite observing that they emphasised that the product should not be seen as an investment, and had been signed by Mr and Mrs W. It said that the disclaimers had been found to evidence compliance with Regulation 14(3). And I agree with the Lender to the extent that the disclaimers did set out that the membership should not be looked at as a financial investment, and Mr and Mrs W signed to say they had read and understood that. But these disclaimers were contained in documents which were given to Mr and Mrs W to sign after they had been through the sales presentation, and after they had agreed to make the purchase on the basis of the presentation and what they had been told by the Supplier. And as I set out, that presentation suggested that the membership could lead to a financial gain (i.e. a profit) from the sale of the Allocated Property. So, I think it unlikely that, having made a decision to purchase on the basis of what they had seen and heard, the disclaimers would have done much to dissuade Mr and Mrs W from thinking that the membership was an investment. Like I said in my PD, it is also ultimately difficult to explain why it was necessary to include such disclaimers if there wasn’t a very real risk of the Supplier marketing and selling membership as an investment, given the difficulty of articulating the benefit of fractional ownership in a way that distinguishes it from other timeshares from the viewpoint of prospective members. The Lender has said the Supplier’s records show Mr and Mrs W questioned the following disclaimer: “We understand that the Property referenced on our Purchase Agreement will be sold as soon as possible on or after the Proposed Sale Date. However we realise that it may not be possible to source a buyer immediately, and that in the event that the sale is effected on or after the Proposed Sale”. The Lender says it is unlikely that Mr and Mrs W would have signed the other disclaimer which confirmed their purchase was not to be viewed as an investment, if it was sold in that way. Like I said above, after Mr and Mrs W were sold their membership as an investment, I think it’s unlikely a disclaimer about such would have done much to discourage them to purchase on that basis. Furthermore, if Mr and Mrs W did raise concerns over the timeframe in which their Allocated Property would be sold, this would suggest their interest in the investment element of their membership and in my opinion, reinforces my view that this played an integral part in their decision to purchase it. The Lender also pointed to the sales note which they say suggest Mr and Mrs W purchased for the additional holidays points and the shorter membership term. If a shorter membership term was so important to them, I would question why they didn’t trade in their entire European Collection points a year earlier. And just because the sales note didn’t mention the

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membership being bought by Mr and Mrs W as an investment, doesn’t mean it wasn’t sold or bought for that reason. Given that the sales representative would likely have been aware that they should not market and/or sell the membership as an investment, I am not at all surprised there’s no reference to this within the note the sales representative left. In addition to this, as mentioned in my PD, I maintain my position that Mr and Mrs W were interested in holidays given their purchase history with the Supplier. And their reservation history demonstrates quite clearly that using the membership for holidays was important, which is unsurprising considering the nature of the product in question. But I do not think that because Mr and Mrs W used their points is an indication that they did not buy the membership for its investment potential – it just shows they were making use of the benefits their membership provided. So, I am satisfied, as I set out in the PD, that Mr and Mrs W were motivated to make their Fractional Club purchase because of the associated share in the Allocated Property and the possibility of a profit. And because of that, the breach of Regulation 14(3) by the Supplier was material to the purchasing decision they ultimately made. 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 W 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 still think it is fair and reasonable that I uphold this complaint. Putting things right In my PD I set out what I considered to be a fair and reasonable way for the Lender to calculate and pay fair compensation to Mr and Mrs W. Neither the Lender nor the PR have made any comments regarding my proposed redress methodology, so I see no reason to depart from what I set out in the PD. For the avoidance of doubt, I have set my directions out again here. Fair Compensation Having found that Mr and Mrs W 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, provided Mr and Mrs W 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 W were existing European Collection members and their membership was traded in against the purchase price of Fractional Club membership. Under their European Collection membership, they had 4,000 of European Collection Points. And, like Fractional Club membership, they had to pay annual management charges as a European Collection members. So, had Mr and Mrs W not purchased Fractional Club membership, they would have always been responsible to pay an annual management charge of some sort. With that being the case, any refund of the annual management charges paid by Mr and Mrs W from the Time of Sale as part of their Fractional Club membership should amount only to the

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difference between those charges and the annual management charges they would have paid as ongoing European Collection members. So, here’s what I think needs to be done to compensate Mr and Mrs W with that being the case – whether or not a court would award such compensation: (1) The Lender should refund Mr and Mrs W’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 the difference between Mr and Mrs W’s Fractional Club annual management charges paid after the Time of Sale and what their European Collection annual management charges would have been had they not purchased Fractional Club membership. (3) The Lender can deduct: i. The value of any promotional giveaways that Mr and Mrs W used or took advantage of; and ii. The market value of the holidays* Mr and Mrs W took using their Fractional Points if the Points value of the holiday(s) taken amounted to more than the total number of European Collection Points they would have been entitled to use at the time of the holiday(s) as ongoing European Collection members. However, this deduction should be proportionate and relate only to the additional Fractional Points that were required to take the holiday(s) in question. For example, if Mr and Mrs W took a holiday worth 2,550 Fractional Points and they would have been entitled to use a total of 2,500 European Collection Points at the relevant time, any deduction for the market value of that holiday should relate only to the 50 additional Fractional Points that were required to take it. But if they would have been entitled to use 2,600 European Collection Points, 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 W’s credit files in connection with the Credit Agreement reported within six years of this decision. (6) If Mr and Mrs W’s Fractional Club membership is still in place at the time of this decision, as long as they agree to hold the benefit of their interest in the Allocated Property for the Lender (or assign it to the Lender if that can be achieved), the Lender must indemnify them against all ongoing liabilities as a result of their Fractional Club membership. *I recognise that it can be difficult to reasonably and reliably determine the market value of holidays when they were taken a long time ago and might not have been available on the open market. So, if it isn’t practical or possible to determine the market value of the holidays Mr and Mrs W took using their Fractional Points, deducting the relevant annual management charges (that correspond to the year(s) in which one or more holidays were taken) payable under the Purchase Agreement

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seems to me to be a practical and proportionate alternative in order to reasonably reflect their usage. **HM Revenue & Customs may require the Lender to take off tax from this interest. If that’s the case, the Lender must give the consumer a certificate showing how much tax it’s taken off if they ask for one. My final decision I uphold this complaint and direct Shawbrook Bank Limited to calculate and pay fair compensation to Mr and Mrs W as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr W and Mrs W to accept or reject my decision before 27 April 2026. Sameena Ali Ombudsman

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