Mitsubishi HC Capital UK Plc · DRN-6234248

The complaint Mr O says his creditor-debtor relationship with Mitsubishi HC Capital UK Plc trading as Novuna Personal Finance (‘Novuna’) was unfair to him under section 140A of the CCA. What happened In February 2013 (the ‘Time of Sale’), Mr O purchased a timeshare membership – which I’ll call ‘Fractional Club membership’ – from a timeshare provider (the ‘Supplier’). The membership was asset backed – which means it gave Mr O more than just holiday rights. It included a share of the net sale proceeds of a property named on the purchase agreement (the ‘Allocated Property’) after the membership term ended. Mr O ‘traded-in’ an existing timeshare membership, which left £8,850 to pay. Mr O borrowed the full amount from Novuna to pay it. In January 2021, Mr O – using a professional representative (‘PR’) – wrote to Novuna (the ‘Letter of Claim’) to make a claim under section 140A of the CCA. Specifically, the Letter of Claim said: • The way the Supplier sold the Fractional Club membership to Mr O was prohibited by the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 (the ‘Timeshare Regulations’). • Mr O was subject to a ‘high pressure’ sale that lasted several hours; the Supplier refused to accept ‘no’; Mr O was told the offer was only available for a limited time; and, Mr O was misled about the benefits of membership. • The Supplier misrepresented the membership by saying: the timeshare was an investment; maintenance fees would remain ‘steady’; and, there would be no issue with availability. The PR also requested details of any commission paid by Novuna to the Supplier. When Novuna didn’t provide a substantive response, the PR referred the complaint to our service. The PR wrote to Novuna again in June 2022 to make two further points: • At the Time of Sale, Mr O was 72 years old. At the end of the membership term, Mr O would be 91 years old. The PR says there was ‘no realistic prospect’ that Mr O would be able to use the membership for the full term and selling it to him was therefore ‘absurd and unfair’. • The Fractional Club membership wasn’t a ‘timeshare contract’ – instead, it was unregulated collective investment scheme (‘UCIS’). The PR says the sale of a UCIS to Mr O was unlawful and Mr O’s creditor-debtor relationship with Novuna was therefore unfair under section 140A. Belatedly, Novuna issued its final response letter in October 2022. It rejected the complaint on every ground.

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The complaint was assessed by one of our investigators who rejected it on its merits. The PR asked that an ombudsman make a final decision. I issued a provisional decision on 26 February 2026, which explained why I didn’t intend to uphold this complaint. It included the following provisional findings: Section 140A Section 140A says a court may make an order if it thinks the relationship between a creditor and a debtor is unfair to the debtor. It’s deliberately framed in wide terms, and a finding of unfairness can flow from something done on the creditor’s behalf in connection with a ‘related agreement’. Here, the purchase agreement is a ‘related agreement’. And, by virtue of section 56 of the CCA, Novuna is legally answerable for the Supplier’s actions. Having considered the entirety of the relationship, I don’t think it was unfair for the purposes of section 140A. In reaching this conclusion, I’ve considered: (1) The standard of the Supplier’s commercial conduct, which includes its sales and marketing practices at the time of sale, and any relevant training material. (2) The information provided by the Supplier at the time of sale, including the contracts and any disclaimers made by the Supplier. (3) The commission arrangements between Novuna and the Supplier at the time of sale and the disclosure of those arrangements. (4) All the evidence provided by both parties on what was supposedly said and/or done at the time of sale. (5) The inherent probabilities of what’s likely to have happened given the circumstances of each sale. Misrepresentation In the Letter of Claim, the PR says the Supplier misrepresented the membership by saying: the timeshare was an investment; maintenance fees would remain ‘steady’; and, there would be no issue with availability. I’ll address the allegation that the Supplier sold the Fractional Club membership as an investment below. For the other allegations, the PR hasn’t provided any supporting evidence. For example, it hasn’t provided any first-hand testimony from Mr O. Essentially, they’re bare allegations. The PR says it didn’t finalise a statement by Mr O but he saw and confirmed the background section of the Letter of Claim and this should ‘stand as his account’. Even if I accept that Mr O read the Letter of Claim before it was sent, a Letter of Claim isn’t evidence. As there isn’t any evidence that Fractional Club membership was misrepresented in the way alleged, I don’t think it was. The Supplier’s sales and marketing practices at the Time of Sale The PR says Mr O was subject to a ‘high pressure’ sale that lasted several hours and the Supplier refused to accept ‘no’. Again, the PR hasn’t provided any evidence to support this allegation. What’s more, it goes against the thrust of what the PR says in the background section of the Letter of Claim: essentially, it says Mr O purchased the Fractional Club membership to try to solve problems he had with his existing membership. The background section doesn’t make any reference to ‘pressure’ or otherwise indicate that Mr O said ‘no’. In the circumstances, I’ve seen insufficient evidence to conclude that Mr O only purchased the

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timeshare membership because his ability to exercise consumer choice was significantly impaired by pressure from the Supplier. The PR also says the Supplier took payment during the cooling-off period. I haven’t seen any evidence that it did. The Supplier says it didn’t and the paperwork suggests it didn’t either. Finally, the PR has drawn my attention to Mr O’s age at the Time of Sale. It says there was ‘no realistic prospect’ that Mr O would be able to use the membership for the full term and selling it to him was therefore ‘absurd and unfair’. But I haven’t heard directly from Mr O, so I don’t know what he thought was ‘realistic’ at the Time of Sale or, importantly, what mattered to him when he decided to purchase the Fractional Club membership. As a 72-year-old man, Mr O would have understood the implications of purchasing a membership that lasted 19 years and I’m not persuaded it was inherently unfair to sell it to him. Overall, therefore, I don’t think that Mr O’s credit relationship with Novuna was rendered unfair to him under section 140A for any of the reasons above. However, the PR also argued that the membership was sold and/or marketed as an investment in breach of Regulation 14(3) of the Timeshare Regulations, and that this renders the relationship unfair under section 140A. The Supplier’s alleged breach of Regulation 14(3) of the Timeshare Regulations I’m satisfied that the Fractional Club membership meets the definition of a ‘timeshare contract’ and is a ‘regulated contract’ for the purposes of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 (the ‘Timeshare Regulations’). For the avoidance of doubt, it was not an ‘unregulated collective investment scheme’ as alleged – the High Court made this clear in R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd [2023] EWHC 1069 (Admin) (‘Shawbrook v Financial Ombudsman Service’). Regulation 14(3) of the Timeshare Regulations says a supplier must not market or sell a proposed timeshare contract as an investment. The term ‘investment’ isn’t defined in the Timeshare Regulations. But I’ll adopt the same definition that was used in Shawbrook v Financial Ombudsman Service, which says it’s a transaction in which money or other property is laid out in the expectation or hope of financial gain or profit. The Fractional Club membership clearly included an investment component in that Mr O’s share of the proceeds of the deferred sale offered the prospect of a financial return – whether or not, like all investments, that return was more, less or the same as the sum invested. But it’s important to note that the fact that the Fractional Club membership included an investment component did not, in itself, transgress the prohibition in Regulation 14(3). Regulation 14(3) prohibits the marketing or selling of a timeshare contract as an investment. It doesn’t prohibit the existence of an investment component in a timeshare contract or the marketing and/or selling of such a contract per se. In other words, the Timeshare Regulations didn’t ban products like the Fractional Club – they simply regulated how they were marketed and sold. To conclude, therefore, that the Fractional Club membership was marketed or sold to Mr O as an investment in breach of Regulation 14(3), I must 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.

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There is competing evidence in this complaint as to whether the Fractional Club membership was marketed and/or sold by the Supplier as an investment in breach of Regulation 14(3). On the one hand, it’s clear that the Supplier made efforts to avoid specifically describing membership of the Fractional Club as an ‘investment’ or quantifying to prospective members, such as Mr O, the financial value of his share in the net sales proceeds of the Allocated Property, along with the investment considerations, like the associated risk and reward. 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 also possible that Fractional Club membership was marketed and sold to Mr O as an investment in breach of Regulation 14(3). However, whether there was a breach of the relevant prohibition by the Supplier is not ultimately determinative of the outcome for this complaint for reasons I’ll explain, so it’s not necessary for me to make a formal finding on this particular issue. Would the credit relationship between Novuna and Mr O have been rendered unfair to him had there been a breach of Regulation 14(3) of the Timeshare Regulations? As I think it’s possible the Supplier breached Regulation 14(3) at the time of sale, I now need to decide what impact it might have had on the fairness of the relationship between Mr O and Novuna. I say this because in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 (‘Plevin’), the Supreme Court said: ‘Section 140A […] does not impose any obligation and is not concerned with the question whether the creditor or anyone else is in breach of a duty. It is concerned with the question whether the creditor’s relationship with the debtor was unfair.’ What this means is that a breach of Regulation 14(3) doesn’t automatically mean the credit relationship is unfair for the purposes of section 140A. Such breaches and their consequences (if there are any) must be considered in the round rather than in a narrow or technical way. For me to conclude that a breach of Regulation 14(3) led to an unfair relationship, I need to see sufficient evidence to conclude, on the balance of probabilities, that the prospect of a financial gain was an important and motivating factor for Mr O when he decided to purchase the membership. That’s why direct testimony from the consumer, in full and in his own words, is so important in a case like this. It allows the decision-maker to assess credibility and consistency, to know precisely what was supposedly said and the context in which it was supposedly said, and, importantly, to hear from the consumer himself about what mattered to him. It’s also important that the decision-maker can see that the Letter of Claim and subsequent submissions genuinely reflect the consumer’s testimony. As I’ve explained above, the PR hasn’t provided any direct, first-hand testimony from Mr O. I therefore have no way of knowing what was important to him when he decided to purchase the membership. It follows that I can’t safely say that the credit relationship in question was unfair because of a breach of Regulation 14(3). The information provided by the Supplier at the time of sale The PR says Mr O wasn’t given sufficient information at the Time of Sale by the Supplier – although it hasn’t said in what way he wasn’t given sufficient information.

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I accept it’s possible that the Supplier didn’t give Mr O sufficient information, in good time (although I make no formal finding on this point). On the available evidence, I’m not persuaded that Mr O wouldn’t have purchased the Fractional Club membership if he’d been given more information about it, or that the relationship was unfair because of the information the Supplier did or did not disclose. Finally, I note that the PR requested details of any commission paid by Novuna to the Supplier and reserved Mr O’s position until it received the information. I’ve therefore considered whether or not the commission payment rendered the credit relationship unfair. The Supreme Court handed down an important judgment on 1 August 2025 in a series of cases concerned with the issue of commission: Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd [2025] UKSC 33 (‘Hopcraft, Johnson and Wrench’). The Supreme Court held that, in each of the three cases, the commission payments made to car dealers by lenders were legal, as claims for the tort of bribery, or the dishonest assistance of a breach of fiduciary duty, had to be predicated on the car dealer owing a fiduciary duty to the consumer, which the car dealers did not owe. A ‘disinterested duty’, as described in Wood v Commercial First Business Ltd & ors and Business Mortgage Finance 4 plc v Pengelly [2021] EWCA Civ 471, is not enough. However, the Supreme Court held that the credit relationship between the lender and Mr Johnson was unfair under Section 140A of the CCA because of the commission paid by the lender to the car dealer. The main reasons for that conclusion included, amongst other things, the following factors: 1. the size of the commission (as a percentage of the total charge for credit). In Mr Johnson’s case it was 55%. This was ‘so high’ and ‘a powerful indication that the relationship…was unfair’ (see paragraph 327); 2. the failure to disclose the commission; and 3. the concealment of the commercial tie between the car dealer and the lender. The Supreme Court also confirmed that the following factors, in what was a non-exhaustive list, will normally be relevant when assessing whether a credit relationship was/is unfair under Section 140A of the CCA: 1. the size of the commission as a proportion of the charge for credit; 2. the way in which commission is calculated (a discretionary commission arrangement, for example, may lead to higher interest rates); 3. the characteristics of the consumer; 4. the extent of any disclosure and the manner of that disclosure (which, insofar as section 56 of the CCA is engaged, includes any disclosure by a supplier when acting as a broker); and 5. compliance with the regulatory rules. I think the Supreme Court’s judgment in Hopcraft, Johnson and Wrench sets out principles which apply to credit brokers other than car dealer-credit brokers. So when considering concerns of undisclosed payments of commission like the one in this complaint, Hopcraft, Johnson and Wrench is relevant law that I’m required to consider under Rule 3.6.4 of the FCA’s DISP rules. However, I don’t think Hopcraft, Johnson and Wrench leads to me to conclude that Mr O’s credit relationship with Novuna was unfair to him for reasons relating to commission given

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the facts and circumstances of this complaint. I haven’t seen anything to suggest that Novuna and the Supplier were tied to one another contractually or commercially in a way that wasn’t properly disclosed to Mr O, nor have I seen anything that persuades me that the commission arrangement between them gave the Supplier a choice over the interest rate that led Mr O into a credit agreement that cost disproportionately more than it otherwise could have. I acknowledge that it’s possible that Novuna and the Supplier failed to follow the regulatory guidance in place at the time of sale insofar as it was relevant to disclosing the commission arrangements between them. But the case law on section 140A makes it clear that regulatory breaches don’t 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. So it isn’t necessary for me to make a formal finding on this because, even if Novuna and the Supplier failed to follow the relevant regulatory guidance at the time of sale, it’s for the reasons set out below that I don’t currently think any such failure is itself a reason to conclude that the credit relationship in question is unfair to Mr O. In stark contrast to the facts of Mr Johnson’s case, the amount of commission paid by Novuna to the Supplier for arranging the credit agreement that Mr O entered into wasn’t high. At £885, it was only 10% of the amount borrowed and even less than that as a proportion of the charge for credit. So had he known at the time of sale that the Supplier was going to be paid a flat rate of commission at that level, I’m not currently persuaded that he either wouldn’t have understood that or would have otherwise questioned the size of the payment at that time. After all, Mr O wanted the Fractional Club membership and had no obvious means of his own to pay for it. And at such a low level, the impact of commission on the cost of the credit he needed for a timeshare he wanted doesn’t strike me as disproportionate. So I think Mr O would still have taken out the loan to fund his purchase had the amount of commission been disclosed. What’s more, based on what I’ve seen so far, the Supplier’s role as a credit broker wasn’t a separate service and distinct from its role as the seller of a timeshare. It was simply a means to an end in the Supplier’s overall pursuit of a successful timeshare sale. I can’t see that the Supplier gave an undertaking – either express or implied – to put to one side its commercial interests in pursuit of that goal when arranging the credit agreement. And as it wasn’t acting as an agent of Mr O but as the supplier of contractual rights he obtained under the purchase agreement, the transaction doesn’t strike me as one with features that suggest the Supplier had an obligation of ‘loyalty’ to him when arranging the credit agreement and thus a fiduciary duty. Overall, I’m currently not persuaded that the commission arrangements between the Supplier and Novuna were likely to have led to a sufficiently extreme inequality of knowledge that rendered the credit relationship unfair to Mr O. Section 140A conclusion Given all the factors I’ve looked at in this part of my decision, and having taken them all into account, I’m not persuaded that the credit relationship between Mr O and Novuna was unfair to him. And as things currently stand, I don’t think it would be fair to uphold this complaint on that basis. Commission: alternative grounds

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While I’ve found that Mr O’s credit relationship with Novuna wasn’t unfair to him for reasons relating to the commission arrangements between it and the Supplier, two of the grounds on which I came to that conclusion also constitute separate and freestanding complaints to Mr O’s complaint about an unfair credit relationship. So, for completeness, I’ve considered those grounds on that basis here. The first ground relates to whether Novuna is liable for the dishonest assistance of a breach of fiduciary duty by the Supplier because it took a payment of commission from Novuna without telling Mr O (i.e., secretly). And the second relates to Novuna’s compliance with the regulatory guidance in place at the time of sale insofar as it was relevant to disclosing the commission arrangements between them. However, for the reasons I set out above, I’m not persuaded that the Supplier – when acting as credit broker – owed Mr O a fiduciary duty. So the remedies that might be available in law in relation to the payment of secret commission aren’t, in my view, available to him. And while it’s possible that Novuna failed to follow the regulatory guidance in place at the time of sale insofar as it was relevant to disclosing the commission arrangements between it and the Supplier, I don’t think any such failure on Novuna’s part is itself a reason to uphold this complaint because, for the reasons I also set out above, I think he would still have taken out the loan to fund his purchase at the time of sale had there been more adequate disclosure of the commission arrangements that applied at that time. Overall conclusion In conclusion, given the facts and circumstances of this complaint, I’m not persuaded that Novuna was party to a credit relationship with Mr O under the credit agreement and related purchase 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 to direct Novuna to compensate Mr O. I asked both parties to provide any further comments or evidence for me to consider by 12 March 2026. Neither party has responded to my provisional decision. I’m now finalising my decision. The legal and regulatory context When considering what is, in my opinion, fair and reasonable in all the circumstances of the complaint, I’m required by DISP 3.6.3R of the Financial Conduct Authority (‘FCA’) Handbook to take into account: ‘(1) relevant: (a) law and regulations; (b) regulators’ rules, guidance and standards; (c) codes of practice; and (2) ([when] appropriate) what [I consider] to have been good industry practice at the relevant time.’ The legal and regulatory context that’s relevant to this complaint is, in many ways, no different to that shared in several hundred decisions by ombudsmen on very similar complaints – which can be found on our website. I therefore don’t think it’s necessary to set

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out that context in detail here. But I’d add that the following regulatory rules/guidance are also relevant: The Office of Fair Trading’s Irresponsible Lending Guidance – 31 March 2010 The primary purpose of this guidance was to provide greater clarity for businesses and consumer representatives as to the business practices that the Office of Fair Trading (the ‘OFT’) thought might have constituted irresponsible lending for the purposes of Section 25(2B) of the CCA. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2 • Paragraph 2.3 • Paragraph 5.5 The OFT’s Guidance for Credit Brokers and Intermediaries – 24 November 2011 The primary purpose of this guidance was to provide clarity for credit brokers and credit intermediaries as to the standards expected of them by the OFT when they dealt with actual or prospective borrowers. Below are the most relevant paragraphs as they were at the relevant time: • Paragraph 2.2 • Paragraph 3.7 • Paragraph 4.8 What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. As neither party has provided any further comments or evidence, I confirm my provisional findings. My reasons remain the same. My final decision For the reasons given, I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr O to accept or reject my decision before 15 April 2026. Christopher Reeves Ombudsman

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