posted 21st May 2023
Mrs Justice Collins Rice Upholds Fractional Timeshare Decisions of The Financial Ombudsman Service.
The recent surge in consumer complaints about fractional ownership timeshare products offered by Club La Costa and Diamond Resorts, and financed by various UK financial institutions, including Shawbrook Bank Limited, Clydesdale Financial Services Limited (trading as Barclays Partner Finance), and Hitachi, has drawn the attention of the Financial Ombudsman Service (FOS).
In response, the FOS selected two lead cases, referred to as the "Test Cases," to investigate the matter thoroughly. After an extensive process involving industry submissions lasting several years, the FOS issued comprehensive final decisions in late 2021.
In both Test Cases, the Ombudsman determined that the fractional ownership products had been mis-sold, leading to the conclusion that the contractual arrangements and associated loans should be invalidated.
The Ombudsman's decisions were based on several grounds, including the violation of regulations that prohibit the sale of timeshare contracts as investments, the failure to provide consumers with clear and accurate information, unfair contractual terms, and the presence of an unfair relationship under consumer credit laws.
As a remedy, the Ombudsman recommended setting aside the loan agreement, refunding all payments made, and awarding 8% per annum interest from the date of loss to the resolution of the complaint.
Naturally, these decisions had significant implications for the banks involved, potentially exposing them to substantial compensation claims running into millions of pounds. In an effort to challenge the FOS decisions, the banks sought permission to initiate judicial review proceedings in the High Court.
These proceedings, consolidated under the cases Shawbrook Bank Limited v The Financial Ombudsman Service and Clydesdale Financial Services Limited (trading as Barclays Partner Finance) v The Financial Ombudsman Service (CO/506/2022 & CO/4312/2021), aimed to examine the lawfulness of the Ombudsman's decisions.
It is important to note that the purpose of judicial review is to assess the legality of decisions rather than reevaluate their merits. Challenging a FOS decision through judicial review is particularly intricate due to the broad discretion granted to the Ombudsman in their decision-making process. Nevertheless, the banks, along with other interested parties such as Mitsubishi HC Capital (formerly Hitachi), Diamond Resorts, Club La Costa, and ourselves, pursued the review.
The judicial review hearing presided over by Mrs. Justice Collins Rice, commenced on March 16, 2023, and lasted for three days. Counsels representing the banks and the FOS presented their arguments skillfully, supported by a substantial volume of documents, including Skeleton Arguments and relevant case authorities.
On May 5, 2023, Mrs Justice Collins Rice delivered her judgment, dismissing the claims for judicial review and thereby upholding the FOS's findings in the Test Cases.
The High Court judge determined that the Ombudsman did not make any legal errors in interpreting the relevant regulations, including the prohibition of selling timeshares as investments. Additionally, the judge found that the Ombudsman's application of the Consumer Credit Act and their assessment of an unfair relationship, based on the features of the fractional products and their sales practices, were legally sound.
Moreover, the judge affirmed that the Ombudsman's approach to contractual terms and the evaluation of unfairness complied with the applicable regulations. While recognizing the legal point regarding the statutory deemed agency, the judge emphasized the fact-sensitive evaluation conducted by the Ombudsman and their authority to determine a fair and reasonable outcome.
Fractional Timeshare Decision Key Points.
- The banks have lost their attempt to overturn the decision made by the Financial Ombudsman Service to compensate Club La Costa and Diamond Resorts Fractional Ownership members.
- Time limits will apply. Therefore you only have six years from the point that you took out your finance or from when the finance was paid off to make a claim. Delaying your submission could affect your chances of gaining compensation.
- Only regulated companies, such as ours, are able to submit your claim. Unregulated companies, such as the ones that predominantly cold call and take upfront fees, will be legally unable to submit your claim and subsequently leave you time-barred.
- Contact us today to submit your compensation claim. 100% No Upfront Fees to pay us.