Mitsubishi HC Capital UK PLC · DRN-4970456

The complaint Mr S’s complaint is, in essence, that Mitsubishi HC Capital UK PLC trading as Novuna Personal Finance (the ‘Lender’) acted unfairly and unreasonably by (1) being party to an unfair credit relationship with him under Section 140A of the Consumer Credit Act 1974 (as amended) (the ‘CCA’) and (2) deciding against paying claims under Section 75 of the CCA. What happened Mr S purchased membership of a timeshare (the ‘Fractional Club’) from a timeshare provider (the ‘Supplier’) on 8 June 2014 (the ‘Time of Sale’). He entered into an agreement with the Supplier to buy 1,200 fractional points at a cost of £15,349 (the ‘Purchase Agreement’). Fractional Club membership was asset backed – which meant it gave Mr S more than just holiday rights. It also included a share in the net sale proceeds of a property named on the Purchase Agreement (the ‘Allocated Property’) after his membership term ends. Mr S paid for his Fractional Club membership by taking finance of £15,349 from the Lender (the ‘Credit Agreement’). Mr S – using a professional representative (the ‘PR’) – wrote to the Lender on 9 February 2024 (the ‘Letter of Complaint’) to raise a number of different concerns. Since then, the PR has raised some further matters it says are relevant to the outcome of the complaint. As both sides are familiar with the concerns raised, it isn’t necessary to repeat them in detail here beyond the summary above. The Lender dealt with Mr S’s concerns as a complaint and issued its final response letter on 11 April 2024, rejecting it on every ground. The complaint was then referred to the Financial Ombudsman Service. I issued a provisional decision on 18 February 2026 setting out why I didn’t plan to uphold Mr S’s complaint. I said: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done that, I do not currently think it should be upheld. However, before I explain why, I want to make it clear that my role as an Ombudsman is not to address every single point that has been made to date. Instead, it is to decide what is fair and reasonable in the circumstances of this complaint. So, if I have not commented on, or referred to, something that either party has said, that does not mean I have not considered it. Section 75 of the CCA: the Supplier’s misrepresentations at the Time of Sale As a general rule, creditors can reasonably reject Section 75 claims that they are first informed about after the claim has become time-barred under the Limitation Act 1980 (the ‘LA’) as it wouldn’t be fair to expect creditors to look into such claims so long after the liability arose and after a limitation defence would be available in court. So, it is relevant to consider

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whether Mr S’s Section 75 claim for misrepresentation was time-barred under the LA before he put it to the Lender. As I mentioned above, a claim under Section 75 is a “like” claim against the creditor. It essentially mirrors the claim Mr S could make against the Supplier. A claim for misrepresentation against the Supplier would ordinarily be made under Section 2(1) of the Misrepresentation Act 1967. And the limitation period to make such a claim expires six years from the date on which the cause of action accrued (see Section 2 of the LA). But a claim, like the one in question here, under Section 75 is also ‘an action to recover any sum by virtue of any enactment’ under Section 9 of the LA. And the limitation period under that provision is also six years from the date on which the cause of action accrued. The date on which the cause of action accrued was the Time of Sale. I say this because Mr S entered into the purchase of his timeshare at that time based on the alleged misrepresentations of the Supplier – which he said were relied upon. And as the loan from the Lender was used to help finance the purchase, it was when he entered into the Credit Agreement that he suffered a loss. Mr S first notified the Lender of his Section 75 claim on 9 February 2024. And as more than six years had passed between the Time of Sale and when that claim was first put to the Lender, I don’t think it was unfair or unreasonable of the Lender to reject Mr S’s concerns about the Supplier’s alleged misrepresentations. Section 75 of the CCA: the Supplier’s Breach of Contract In the Letter of Complaint Mr S said that he could not holiday where and when he wanted to – although his testimony suggests he may never have attempted to book a holiday due to the cost of flights. On my reading of the complaint, this suggests that the Supplier was not living up to its end of the bargain, meaning it could be viewed as potentially breaching the Purchase Agreement. It is not clear precisely when this was alleged to have happened, but if it happened within six years of the time the complaint was first made, such a claim would not have been made too late under the LA. Yet, like any holiday accommodation, availability was not unlimited – given the higher demand at peak times, like school holidays, for instance. Some of the sales paperwork likely to have been signed by Mr S states that the availability of holidays was/is subject to demand. I accept that he may not have been able to take certain holidays. But I have not seen enough to persuade me that the Supplier had breached the terms of the Purchase Agreement. So, from the evidence I have seen, I do not think the Lender is liable to pay Mr S any compensation for a breach of contract by the Supplier. And with that being the case, I do not think the Lender acted unfairly or unreasonably in relation to this aspect of the complaint either. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? I’ve already explained why I’m not persuaded that Fractional Club membership was actionably misrepresented by the Supplier at the Time of Sale. But there are other aspects of the sales process that, being the subject of dissatisfaction, I must explore with Section 140A in mind if I’m to consider this complaint in full – which is what I’ve done next.

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Having considered the entirety of the credit relationship between Mr S 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 6. Any existing unfairness from a related credit agreement. I have then considered the impact of these on the fairness of the credit relationship between Mr S and the Lender. The Supplier’s sales & marketing practices at the Time of Sale Mr S’s complaint about the Lender being party to an unfair credit relationship was and is made for several reasons. They include allegations that: 1. The right checks weren’t carried out before the Lender lent to Mr S. 2. The Credit Agreement was arranged by a broker acting outside of its authorisation The PR said the Lender didn’t carry out sufficient affordability checks before granting the loan to Mr S. I haven’t seen anything to persuade me that the right checks weren’t carried out by the Lender given this complaint’s circumstances. But even if I were to find that the Lender failed to do everything it should have when it agreed to lend (and I make no such finding), I would have to be satisfied that the money lent to Mr S was actually unaffordable before also concluding that he lost out as a result and then consider whether the credit relationship with the Lender was unfair to him for this reason. But from the information provided, I am not satisfied that the lending was unaffordable for Mr S. Connected to this is the suggestion by the PR that the Credit Agreement was arranged by an unauthorised credit broker the upshot of which is to suggest that the Lender wasn’t permitted to enforce the Credit Agreement. However, it looks to me like Mr S knew, amongst other things, how much he was borrowing and repaying each month, who he was borrowing from and that he was borrowing money to pay for Fractional Club membership. And as the lending doesn’t look like it was unaffordable for them, even if the Credit Agreement was arranged by a broker that didn’t have the necessary permission to do so (which I make no formal finding on), I can’t see why that led to Mr S suffering a financial loss – such that I can say that the credit relationship in question was unfair on him as a result. And with that being the case, I’m not persuaded that it would be fair or reasonable to tell the Lender to compensate him, even if the loan wasn’t arranged properly. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations

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The main reason, why the PR now says the credit relationship with the Lender was unfair to Mr S is the suggestion that Fractional Club membership was marketed and sold to him as an investment in breach of prohibition against selling timeshares in that way. The Lender does not dispute, and I am satisfied, that Mr S’s Fractional Club membership met the definition of a “timeshare contract” and was a “regulated contract” for the purposes of the Timeshare Regulations. Regulation 14(3) of the Timeshare Regulations prohibited the Supplier from marketing or selling Fractional Club membership as an investment. This is what the provision said at the Time of Sale: “A trader must not market or sell a proposed timeshare contract or long-term holiday product contract as an investment if the proposed contract would be a regulated contract.” But the PR says that the Supplier did exactly that at the Time of Sale. The term “investment” is not defined in the Timeshare Regulations. But for the purposes of this provisional decision, and by reference to the decided authorities, an investment is a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. A share in the Allocated Property clearly constituted an investment as it offered Mr S the prospect of a financial return – whether or not, like all investments, that was more than what he first put into it. But it is important to note at this stage that the fact that Fractional Club membership included an investment element did not, itself, transgress the prohibition in Regulation 14(3). That provision prohibits the marketing and selling of a timeshare contract as an investment. It doesn’t prohibit the mere existence of an investment element in a timeshare contract or prohibit the marketing and selling of such a timeshare contract per se.1 In other words, the Timeshare Regulations did not ban products such as the Fractional Club. They just regulated how such products were marketed and sold. To conclude, therefore, that Fractional Club membership was marketed or sold to Mr S as an investment in breach of Regulation 14(3), I have to be persuaded that it was more likely than not that the Supplier marketed and/or sold membership to him as an investment, i.e. told him or led him to believe that Fractional Club membership offered him the prospect of a financial gain (i.e., a profit) given the facts and circumstances of this complaint. There is competing evidence in this complaint as to whether Fractional Club membership was marketed and/or sold by the Supplier at the Time of Sale as an investment in breach of regulation 14(3) of the Timeshare Regulations. On the one hand, it is clear that the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective purchasers, such as Mr S, 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. 1 The PR has argued that Fractional Club membership amounted to an Unregulated Collective Investment Scheme, however this was considered and rejected in the judgment in R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd and R (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin).

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On the other hand, I acknowledge that the Supplier’s sales process left open the possibility that the sales representative may have positioned Fractional Club membership as an investment. So, I accept that it’s equally possible that Fractional Club membership was marketed and sold to Mr S as an investment in breach of Regulation 14(3). However, whether or not there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome in this complaint for reasons I will come on to shortly. And with that being the case, it’s not necessary to make a formal finding on that particular issue for the purposes of this decision. Would the credit relationship between the Lender and Mr S have been rendered unfair to him had there been a breach of Regulation 14(3) of the Timeshare Regulations? Having found that it was possible that the Supplier breached Regulation 14(3) of the Timeshare Regulations at the Time of Sale, I now need to consider what impact that breach had on the fairness of the credit relationship between Mr S and the Lender under the Credit Agreement and related Purchase Agreement as the case law on Section 140A makes it clear that regulatory breaches do not automatically create unfairness for the purposes of that provision. Such breaches and their consequences (if there are any) must be considered in the round, rather than in a narrow or technical way. Indeed, it seems to me that, if I am to conclude that a breach of Regulation 14(3) led to a credit relationship between Mr S and the Lender that was unfair to him and warranted relief as a result, whether the Supplier’s breach of Regulation 14(3) led him to enter into the Purchase Agreement and the Credit Agreement is an important consideration. But on my reading of the evidence before me, the prospect of a financial gain from Fractional Club membership was not an important and motivating factor when Mr S decided to go ahead with his purchase. The PR provided notes it took from a call it said it had with Mr S on 15 January 2024. Aside from noting that Fractional Club membership was asset based, which is simply a factual description, I can see no reference in the notes to Mr S having said the Supplier led him to believe he could make a profit or financial gain from Fractional Club membership. I’ve also seen a signed written statement from Mr S dated 2 November 2016, much closer to the Time of Sale, in which again there is no reference to this. Both the notes and the statement suggest to me that Mr S was unhappy because of the cost of flights and had therefore not used his membership. I cannot discern from either of these pieces of evidence that financial gain or profit were important factors in Mr S’s decision to purchase Fractional Club membership. I recognise the Letter of Complaint makes reference to Mr S being told he could recoup his investment. But this letter is not consistent with the notes the PR took from its call with Mr S – which makes no such assertion. And it’s a letter I’ve seen used in the same format for several of the PR’s clients. So overall, I don’t think I can give much weight to it. The PR also provided notes it said were taken by a third-party timeshare claims company (‘T’) from a call it said took place with Mr S on 12 January 2024 and an email it said Mr S sent to T on 10 January 2024. The notes say that the “investment aspect” of Fractional Club membership “tipped the scale” for Mr S and that he would get money back at the end with profit.

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It is fair to say the notes place almost exclusive emphasis on the investment aspect of Fractional Club membership and on the hope or expectation of making a profit. But I find this challenging to reconcile with the PR’s notes and Mr S’s earlier written statement where there is no such emphasis. Should this issue have had the importance the notes suggest it did, I’d have expected it to feature more prominently in the PR’s notes, or in Mr S’s written statement. But it doesn’t, and the PR’s notes and Mr S’s written statement from 2016 are consistent in their main reason for Mr S’s dissatisfaction being the cost of flights making holidays prohibitively expensive. The email of 10 January from Mr S to T says that he had been cold called by a company to help him recover ‘an investment’ made with the Supplier and that he ‘met the criteria’. I cannot therefore rule out the possibility that before making the call to T, Mr S’s assertions had been influenced by whatever discussions he’d had with the company that cold called him. That seems more likely to me given Mr S’s statement in 2016 made no reference to the investment element of Fractional Club membership being of importance to him. With all of this considered, the available evidence is not consistent enough to persuade me that Mr S was motivated to make his purchase by the prospect of a financial gain or profit. That doesn’t mean Mr S wasn’t interested in a share in the Allocated Property. After all, that wouldn’t be surprising given the nature of the product at the centre of this complaint. But as Mr S doesn’t persuade me that his purchase was motivated by his share in the Allocated Property and the possibility of a profit, I don’t think a breach of Regulation 14(3) by the Supplier was likely to have been material to the decision he ultimately made. On balance, therefore, even if the Supplier had marketed or sold the Fractional Club membership as an investment in breach of Regulation 14(3) of the Timeshare Regulations, I am not persuaded that Mr S’s decision to purchase Fractional Club membership at the Time of Sale was motivated by the prospect of a financial gain (i.e., a profit). And for that reason, I do not think the credit relationship between Mr S and the Lender was unfair to him even if the Supplier had breached Regulation 14(3). Overall Conclusion In conclusion, given the facts and circumstances of this complaint, I am not persuaded that the Lender was party to a credit relationship with Mr S under the Credit Agreement and related Purchase Agreement that was unfair to him for the purposes of Section 140A of the CCA. I do not think that the Lender acted unfairly or unreasonably when it dealt with Mr S’s Section 75 claims. And having taken everything into account, I see no other reason why it would be fair or reasonable to direct the Lender to compensate him.” The PR did not agree with my provisional decision and provided further comments and evidence it wished for me to consider. The Lender agreed with my provisional 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. The legal and regulatory context that I think is relevant to this complaint is, in many ways. no

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different to that shared in several hundred published ombudsman decisions on very similar complaints – which can be found on the Financial Ombudsman Service’s website. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Following the responses from both parties, I’ve considered the case afresh and having done so, I’ve reached the same decision as that which I outlined in my provisional findings, for broadly the same reasons. Again, my role as an Ombudsman isn’t to address every single point which has been made to date, but to decide what is fair and reasonable in the circumstances of this complaint. If I haven’t commented on, or referred to, something that either party has said, this doesn’t mean I haven’t considered it. Rather, I’ve focused here on addressing what I consider to be the key issues in deciding this complaint and explaining the reasons for reaching my final decision. The PR’s further comments in response to the PD in the main relate to the issue of whether the credit relationship between Mr S and the Lender was unfair. In particular, the PR has provided further comments in relation to whether the membership was sold to Mr S as an investment at the Time of Sale. As outlined in my provisional decision, the PR originally raised various other points of complaint, all of which I addressed at that time. But they didn’t make any further comments in relation to those in their response to my provisional decision. Indeed, they haven’t said they disagree with any of my provisional conclusions in relation to those other points. And since I haven’t been provided with anything more in relation to those other points by either party, I see no reason to change my conclusions in relation to them as set out in my provisional decision. So, I’ll focus here on the PR’s points raised in response. Section 140A of the CCA: did the Lender participate in an unfair credit relationship? The PR said neither its notes from the call in January 2024 nor Mr S’s written statement purport to be a comprehensive account of the sales presentation or Mr S’s motivations at the Time of Sale and “absence of reference is not evidence that such representations were not made or were not relied upon”. Ultimately, as I explained in my provisional decision, it is important for me to decide if I think any breach of Regulation 14(3) of the Timeshare Regulations (which I still make no finding on) was likely to have been material to Mr S’s decision to purchase Fractional Club membership when considering whether his relationship with the Lender was rendered unfair by any such breach. So, the evidence needs to persuade me of this, and it should go without saying that Mr S’s own testimony is important in establishing what his motives for the purchase were. So, if I think that Mr S’s testimony is unconvincing as to his motivation for making his purchase being the prospect of a profit or financial gain, as is the case here, I remain of the view that I can reasonably conclude from this, and any other surrounding evidence, that it wasn’t given the importance by him that the PR said it was. After all, if it was an important factor for him, I’d expect to see it mentioned when he was asked to talk about his complaint, but when the PR said it first spoke to him it was not. The PR said that silence on investment motivation is not contradictory. However, I never said the evidence was contradictory.

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I remain of the view that the evidence provided from T carries limited weight. His initial email to T, having said he’d been cold called by another timeshare relinquishment company makes reference to “meet(ing) the criteria” directly followed by “as this was definitely presented to us a safe investment with profit at the end”. The reference to meeting criteria still suggests to me there was a strong possibility that Mr S had been subjected to leading questions relating to the investment element of Fractional Club membership – particularly given that the cold call happened after the judgment in the Judicial Review claim2. And so, I find it also possible that Mr S’s email to T had been coloured by that conversation. While it is of course also possible that Mr S’s conversation with that third party elicited accurate recollections, the fact those recollections are not replicated in either the written statement in 2016 or when Mr S contacted the PR, still leads me to conclude Mr S’s purchase was not likely motivated by the prospect of a profit or financial gain from the purchase. So, ultimately, for the above reasons, along with those I already explained in my provisional decision, I remain unpersuaded that any breach of Regulation 14(3) was material to Mr S’s purchasing decision. And for that reason, I do not think the credit relationship between Mr S and the Lender was unfair to him even if the Supplier had breached Regulation 14(3). Conclusion In conclusion, given the facts and circumstances of this complaint, I do not think that the Lender acted unfairly or unreasonably when it dealt with Mr S’s Section 75 claim, and I am not persuaded that the Lender was party to a credit relationship with him under the Credit Agreement that was unfair to him for the purposes of Section 140A of the CCA. And having taken everything into account, I see no other reason why it would be fair or reasonable to direct the Lender to compensate him. My final decision For the reasons I have explained, I do not uphold Mr S’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 30 March 2026. Michael Ball Ombudsman 2 (R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd; 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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